If you have a UK business and are facing company insolvency, pre-pack administration may be able to offer you key advantages over business bankruptcy. Business rescue services routinely advise businesses on how to complete the steps of pre-pack administration, aiming to gain the strongest possible outcome for their clients in the face of both cash flow difficulties and adverse market conditions. Our guide here outlines the basics of the process; some of the key advantages; and some urgent advice for anyone with concerns about potential or actual company insolvency.

Why Do Some Companies Opt For Pre-pack Administration?

It is a myth to assume that every business with critical trading difficulties is going to have to declare business bankruptcy. The law in the UK makes provisions for a number of solutions, including Company Voluntary Arrangements (CVAs), Administration (and its ‘Pre-pack’ variation) and finally voluntary liquidation (meaning effective bankruptcy). Pre-pack administration is always conducted with the goal of ensuring struggling businesses can retain more of their value for owners, directors and creditors. They can also aim to allow you to restart the company’s activities following the process. They can present a more cost effective and timely response for more serious problems. Typically, a company would enter Administration with the appointment of a licensed Insolvency Practitioner and then undergo a fairly rapid sale.

Six Advantages of Pre-pack Administration:

1. It is frequently possible to gain both a valuation and draft contracts before entering Administration. This is often the key to interested parties being able to raise funds in time for the subsequent purchase.

2. In some cases, it has been known for the outgoing company directors or managers to purchase the business in question.

3. For some companies, it can help improve the financial returns as far as the creditors are concerned. When those creditors have close ties to the company in question, this is obviously a critical advantage. .

4. In some circumstances, it may help to support the preservation of the core business of the company in question, meaning staff do not have to be laid off. Apart from avoiding the unpleasantness involved in making valued staff redundant, this is an obvious human resources advantage for those wishing to start again.

5. The Association of Business Recovery Professionals (‘R3’) acknowledge Pre-pack Administration is one of the best methods to resolve a ‘dire situation’ given the appropriate circumstances.

6. This is a tested method, as it has been used over a number of years, and has been gaining popularity in recent times due to its time-sensitive response during today’s challenging economic climate. The better business rescue services will be knowledgeable about every aspect of this method (including all the legal pre-requisites) and be able to provide ongoing support.

The best advice for anyone facing or concerned about company insolvency is to get in contact with business rescue services as early as you possibly can. You will find they offer an independent, professional assessment to identify the best legal option for your business and then steer you calmly through every step of the process. As it is a formalised solution, pre-pack administration is going to require outsourced professional input. This sometimes seems daunting when your business is under pressure – yet it can often be a very timely intervention. Many directors find that even the possibility of business bankruptcy leads them to experience some degree of personal strain. Business rescue services are there to support and guide companies in difficult trading times, helping you to find the very best possible solutions to all business problems. You can be supported to tackle all the everything as confidently as possible, and you’ll gain exert support on legal compliance. This then allows you the certainty of knowing that you are doing all you can to protect both your personal and business interests at this challenging time.

Author Bio: Jason N. Roth enjoys working for the Business Rescue Service, supporting UK companies through Pre-Pack Administration and all other major Business Rescue Services, including intensive support during bankruptcy.

Category: Business
Keywords: Business Rescue Services, Bankruptcy