By: Mike Jervis

A number of recent, high profile cases have cast a critical light on a process used by most insolvency firms the 'pre-pack'. In short, this is where a deal to sell the assets of a failing company is agreed prior to insolvency and completed immediately after the appointment of administrators or receivers.

An obvious point for the IP to make is that a pre-packaged sale of a business does not absolve him from his duty to obtain the best price for the business in question. A pre-pack does not miraculously sanitise a sale at less than full value to insiders or existing management.

The challenge for IPs is to get better at explaining the circumstances when a pre-pack is the best means of preserving value for creditors and shareholders and their role in the process.

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