Pre-pack guidelines could stifle UK rescues

Author: Tom Young | Published: 3 Nov 2015

A new UK guidance note has set out recommendations for improving transparency in pre-pack sales. But the requirements could limit their effectiveness as a means to rescue businesses, according to counsel.

Pre-packs, which involve the sale of a struggling business being negotiated before it is put into administration and completed shortly after the administrators’ appointment, have drawn criticism in recent years. The pre-pack process that dominated retail restructurings in 2008 and 2009 was perceived to lack transparency for creditors. It was not always clear that the best deal had been secured.

Because of this, the most significant changes, which took effect on November 1, are so-called marketing essentials, which an administrator is obliged to consider to ensure they gets the best available deal on a pre-pack sale. These include the requirement to market the business widely and independently for a sustained period. The administrator must also explain and justify the...