New laws will require mandatory independent scrutiny of pre-pack administration sales where connected parties are involved in the purchase
New laws will require mandatory independent scrutiny of pre-pack administration sales where connected parties - such as the insolvent company’s existing directors or shareholders - are involved in the purchase, the government has announced today.
The new laws will improve confidence and transparency in pre-pack administration sales, giving the general public and creditors reassurance that their interests are being protected alongside that of the distressed business.
Pre-pack administrations involve arrangements to sell part or the whole of a company’s business or assets prior to the company entering into administration.
The sale is completed on or shortly after the appointment of an administrator and the speed of the transaction helps preserve the value of the business while saving jobs.
Pre-pack administration sales are widely considered to be a valuable rescue tool. However concerns have been raised that arrangements may not always be in the best interests of creditors. For example, where the sale is made to a connected party, such as the company’s directors or shareholders.
Minister for Corporate Responsibility Lord Callanan said:
Colin Haig, President of insolvency and restructuring trade body R3, said:
Ion Fletcher, Director of Finance Policy, British Property Federation:
The Government will introduce regulations into Parliament in due course.
Notes to Editors
Update April 2021
New regulations come into force today (30 April) implementing the requirement for mandatory independent scrutiny of pre-pack administration sales where connected parties are involved in the purchase. The regulations place restrictions on the disposal of a company’s business or assets to a connected person during the first eight weeks of administration.
The Government has published new guidance for all parties involved in the disposal of company assets in an administration to understand the regulations.
Update February 2021
The government has laid draft regulations in Parliament which implement the requirement for mandatory independent scrutiny of pre-pack administration sales where connected parties are involved in the purchase. The regulations will come into effect once they have been debated and passed in both Houses of Parliament.