A new rule affects “pre-packaged sales” or “pre-packs” - arrangements to sell a company’s business or assets to a buyer before an administrator is appointed. The administrator effects the sale on his appointment. Unsecured creditors have no chance for involvement in the sale of the business or assets before it takes place. The method has been in vogue for some time but is contentious.
To try to remedy one of the perceived evils, a new Statement of Insolvency Practice addressed to administrators involved in pre-packaged sales aims to require administrators to provide creditors with information about the sale such as the name of the buyer of the business and the price paid.
The new guidelines require practitioners to:
· Keep a detailed record of the reasons why a pre-packaged sale has been chosen as the best course of action for creditors.
· Make it clear to the directors of the company that they have been appointed to advise the company, and not the directors on their personal positions, where that is the case.
· Encourage the directors of the company to take independent advice, in particular if any of the directors proposes to acquire assets in the sale.
The Statement of Insolvency Practice 16 (E&W) (SIP 16) took effect on 1st January 2009.
