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Pre-packaged administrations: a review

This review asks whether pre-packaged administrations (pre-packs) are a viable rescue tool or an abuse of the insolvency process.


Pre-packaged administrations - viable rescue tool or an abuse of the insolvency process?

Teresa Graham will lead the review.


A pre-packaged administration (a pre-pack) occurs where negotiations for the sale of a company’s business and assets take place before administration, and the sale occurs when the administrator is appointed or very soon afterwards. Pre-packs are not specifically provided for in insolvency legislation – they have arisen out of practice and through judicial approval.

Pre-packs are a growing tool for rescue of a business. They can be an important means of rescuing businesses as the sale can be done quickly, reducing the likelihood of key employees and contracts being lost and preserving the value of the business and the returns for creditors.

However, there are concerns that the pre-pack process is not transparent and may have damaging effects for some groups or cause possible longer term harm. The issues raised include:

  • whether businesses are being sold for less than their value, especially where this is to the previous owner or a connected party with no open market valuation

  • possible conflicts of interest for the insolvency practitioner (where there is close working with the directors or when appointed by the floating charge holder)

  • lack of involvement of unsecured creditors, who are only informed of the deal after it has taken place

  • the role of advertising targeted at directors of distressed companies

  • giving an unfair market advantage by allowing the new company to leave behind its unwanted debts

  • causing longer term economic harm by allowing inefficient businesses to carry on trading

Terms of reference for the review

The terms of reference for the review are to assess:

  • the long-term impact of pre-pack deals to form a view as to whether they encourage growth and employment; and whether they provide the best value for creditors as a whole

  • the usefulness of the pre-pack procedure in the context of business rescue generally, using international comparisons as and when appropriate

  • whether pre-packs cause harm to any particular groups of creditors and specifically whether unsecured creditors are disadvantaged

  • whether there are any practices associated with pre-packs that cause harm

Desired outcome

A published report will explain how pre-packs operate in practice with a view as to whether pre-packs generally are in the interests of creditors and the wider economy, and:

  • if so, produce recommendations as to whether the benefits from pre-packs can be further increased and how creditor confidence in the procedure can be improved, or

  • if not, produce recommendations as to what should be changed


The review should not confine itself to issues of legislation and regulation, but should also consider the guidance and advice that is available to creditors and others who are affected by insolvencies.

The review should cover administrations in Great Britain.


Emerging findings will be presented to ministers at the end of 2013 with a final report ready for publication in Spring 2014.

Published 28 March 2014