Bussiness Advice
Understanding the concept of pre-pack administration
When limited companies are faced by financial problems, an administration order is issued to protect such companies from their creditors. This allows the company to form a debt-restructuring plan to present to the court and the creditors averting business bankruptcy. This process usually requires the guidance of a licensed insolvency practitioner. Once the company has entered administration, the insolvency practitioner may decide to sell the assets immediately before winding up the company. This is what is referred to as pre pack administration. This process has gained much popularity because the administrator helps the creditors realise more than they would get through ordinary winding up. It also helps the company directors to get rid of unwanted lease agreements and legacy debts. Pre pack administration has continued to receive criticism because in all sense, it is the same company that continues to operate devoid of the creditors. However, the introduction of insolvency practitioners helps the process become more transparent for the creditors. Only the company employees have nothing to loose from this arrangement since they retain their jobs with the same employment terms.