A pre-pack is the process of selling the assets of a company either immediately before or immediately after it has entered administration. It is sometimes the case that the previous directors or management purchase the assets of the company from the administrator and set up a new company, although pre-packs can and do involve sale to a completely new party.
This process has advantages in that it enables the administrator to realise a greater amount for the assets because business continuity and goodwill are preserved. The employees of the company are also usually transferred to the new company, as part of the deal.
A prepack does not dispense with the need for proper valuation of the business and assets, and the proposed administrator will consdier whether some form of marketing would be beneficial. However, the cost of the process can be lower than in a sale to an external party as the administrators do not need to find funding to trade the business.
A prepack should not be seen as an easy way to ditch a company's debts but it can be the right thing to do in certain cirucmstances. If you think it might be beneficial, contact Allan McLeod, Maureen Leslie or Antonia McIntyre to discuss it.
Remember though that you will have to fund the acquisition of the assets which will require independent valuation. A prepack may also generate negative publicity and you should be prepared for creditors to insist on strict trading terms if you successfully complete a deal of this type.
In some cases, a Company Voluntary Arrangement may be a better alternative for all parties.
Contact MLM for expert advice.