Business Secretary Vince Cable has launched a review of the pre-pack administration process amid concern that the system is causing problems for creditors.
Pre-pack administrations have been a controversial issue for some time now but the matter has come to a head again this year as another flurry of companies hit the wall.
Internacionale is one of the latest distressed businesses to be sold through a pre-pack administration. Its administrators at EY sold the firm as a going concern almost as soon as they were appointed.
Cable has suggested that the heavy reliance on pre-packs within the insolvency industry could provide rogue traders with the cover under which they could abandon their debts and continue trading under a new name.
He added that they could function as “a quick move to keep the company going in a new form and keep the jobs in place” but noted that there is a risk this will come at the cost of unscrupulous traders using the law to hide from their debts.
“You do have these so-called phoenix companies when owners cynically shut down their companies in order to wipe out their debts and start again the following day under a slightly different name," he said. "Where there is evidence of that kind of serial behaviour, acting against the interest of legitimate parties like creditors, we want to make sure that is properly taken into account in the company disqualification process."
The comments came during the Business Secretary's speech at the London Stock Exchange in which Mr Cable also brought up the matter of 'zombie companies'. Discussed by various economists in recent times, this phenomenon involves fundamentally flawed businesses hanging on due to low interest rates. The Business Secretary warned that these companies could quite easily fall in to administration as soon as economic conditions change. 
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