‘Pre-Pack’ insolvency sales occur when a sale of an insolvent company’s business and assets is negotiated shortly before the company enters liquidation. Once in liquidation, then the sale is completed by the appointed liquidator.
Key benefits of pre-pack sales:
- Assets are independently valued and (as far as possible) marketed to achieve the best value.
- Negotiations will involve the proposed liquidator acting independently and in the interest of the company and creditors – which substantially lowers the purchaser’s risk of the transaction being subsequently challenged.
- It can be clearly demonstrated that the ‘pre-pack sale’ represents the best outcome in the circumstances for the company in liquidation and its creditors.
- The details of any sales are subject to full disclosure to the company’s shareholders and creditors.
Controversy & Mistrust
Pre-pack sales can be subject to controversy and suspicion by creditors. Sales are generally completed quickly giving a limited opportunity for outside enquiry before completion and often, the highest prices are offered by those who have had some prior involvement in the company.
This is especially true with small to medium businesses where a lot of intangible value will be tied up in the knowledge and experience of the former directors.
A Force for Good – Our Opinion
In our view, when properly implemented, ‘pre-pack’ liquidation sales are a very useful tool for business recovery.
Key benefits include:
- Preservation and recycling of valuable assets.
- It can help to protect jobs.
- Can contribute to reducing the level of potential creditor claims, especially when a purchaser agrees to take over certain historical obligations; for example, with customers, staff and landlords, etc.
- If connected parties are involved, they are given the opportunity to contribute positively to the economy once again, after gaining valuable insight from experiencing failure.
Here at The Liquidation Advice Centre, we support long-term business success by helping companies fail easily, helping those involved by providing a fresh start. A ‘pre-pack’ sale of assets can help this progression, and we’re here to assist you through the whole process – so you can achieve the best possible outcome.
Don’t hesitate to contact our experienced team on 0333 241 9019 for more information and guidance.