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Pros and Cons of “Pre-Pack” Administration Sales

Reasons to choose Wilson Browne

What is a Pre-Pack?

The term pre-pack describes the process by which an insolvent company is put into administration, and its business or assets are immediately sold by the administrator under the terms of a sale that was negotiated prior to the administrator being appointed.

A typical pre-pack involves the sale of a company’s business on a going concern basis, but there is no “one-size-fits-all”, and a pre-pack could involve the sale of only selected assets of the insolvent company, with other assets being sold under one or more separate transactions.

Pre-pack Advantages

The advantages of a pre-pack sale include the following:

  • A pre-pack sale can achieve the rapid transfer of a business to a new owner. This can result in a higher price being realisable by avoiding damage to the business as a consequence of insolvency. In turn, this can produce a higher return for the benefit of the insolvent company’s creditors.
  • The relative continuity of the business under new ownership can minimise damaging ongoing relationships with customers and suppliers for example.
  • The employees of the business will typically transfer into the employment of the new business owner under the TUPE regulations, thereby potentially preserving jobs and avoiding the need for compulsory redundancies.

Pre-Pack Disadvantages and Criticisms

The disadvantages and criticisms of pre-packs include the following:

  • Pre-packs do not always realise the best return for unsecured creditors of the insolvent company. The fact that any publicity concerning the insolvency of the company concerned could damage or destroy the business means that a business being sold by way of a pre-pack will typically not be widely advertised to potentially interested buyers. The result of this is that there can be no guarantee that the value realised for the business will be the best that may have been achievable on the open market.
  • Unsecured creditors of the insolvent company typically do not realise that a pre-pack sale is going to happen and therefore have no opportunity to vote on the proposal or to object in an attempt to protect their unsecured interests.
  • Pre-packs are similar to the now outlawed practice of creating “phoenix” companies, by which a company is put into liquidation by its management before the same business is transferred to a new “phoenix” company whilst leaving the debts of the insolvent company behind. This similarity can increase the suspicion of creditors in relation to pre-packs, especially if the business is sold back to the original directors or shareholders of the insolvent company.

The Company and Commercial team at Wilson Browne Solicitors is ideally placed to advise on all aspects of pre-pack administration sales, whether acting for administrators or potential purchasers of the business concerned and is well equipped to act with the speed and proactivity required for the successful completion of pre-pack sales.

For a confidential and no obligation initial discussion about how we may be able to help, please contact the Company and Commercial team on 0800 088 6004 or fill in our online form

Duncan Crowther


Duncan Crowther


Duncan is a Solicitor and Partner. He specialises in giving corporate & commercial, and employment advice to businesses and companies throughout the region. Duncan has a background in engineering and is well equipped to understand the most complex of contracts and issues facing businesses.