Pre Pack Insolvencies are changing

There's no doubting that Pre-Pack sales are an important option when looking to rescue a business quickly and discreetly, however when those sales are to connected parties, there may well be a hint of controversy or suspicion.

Statement of Insolvency Practice 16 (SIP 16) introduced in January 2009, was designed to assist creditors understand the reasons why an Insolvency Practitioner (IP) decided on a Pre-Packaged sale and laid out guidelines for IP's to follow.

The "Pre-Pack Pool' was established in 2015 to enable connected parties to seek an 'opinion' on whether the proposed sale was reasonable given the circumstances, however the process was voluntary and its review was not binding.

In October 2020 the Insolvency Service published a review into Pre-Pack sales and The Administration (Restrictions on Disposals etc to Connected Persons) Regulations 2021 will apply to administrations on/after 30 April 2021. It is hoped these regulations will provide greater transparency for creditors and reduce scepticism.

In overview the main aspects are :-

1. An IP is unable to dispose of assets to a connected party within 8 weeks of appointment without either a) approval of the creditors or b) a written independent opinion;

2. The Evaluator (provider of the opinion) must be independent;

3. The IP must have no reason to doubt the independence/ and experience of the Evaluator;

4. The written opinion must state that the sale may or may not proceed;

5. If the opinion states the sale should not proceed the IP may still proceed although they will have to make clear their rationale;

6. A connected party may obtain multiple reports;

(Whitehall Corporate Finance are not Insolvency Practitioners although we are able to offer guidance and advice on the financial position of your business)