Opposition mounts against planned pre-pack administration changes

Concerns have emerged that the numbers of companies entering administration will rise significantly if the new plans for administrators giving creditors a three-day notice period goes ahead.

PwC partner Mike Jervis said, “It comes from a rather cynical view of pre-packs which, while you can understand the thinking behind the view, will make the advantages – speed, continuity of business and employment – that much harder to achieve.”

Strong opposition to the planned reforms to the pre-pack administration process surprised civil servants at a meeting between Insolvency Service officials and stakeholders on Tuesday this week.

The three-day notice period will, say insolvency experts, easily become a full week when the administrators have to allow time for postage and weekends, leaving suppliers with the same level of uncertainty the deals are meant to avoid.

“The purpose of pre-packs”, said Adam Plainer, head of the London restructuring team at Weil Gotshal, “is to ensure business continuity, but even if suppliers are happy to work with the new company, there’s a good chance their credit insurers may not let them, and you’ll end up with the same confusion as a general administration.”

“Pre-packs in the right circumstances are a hugely valuable tool,” said Peter Cranston, former president of the Insolvency Lawyers’ Association.

Stephen Ideh at Business Data commented, "Despite the opposition, there is a growing number of buyers who welcome the reform as a chance to open the playing field for distressed business sales, possibly resulting in higher prices paid for businesses and more money for creditors".

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