Pre-pack administration sales set for closer scrutiny

Pre-pack administration sales are set for closer scrutiny under new laws announced today.

The method, which sees the whole or part of a business or assets sold before it falls into administration, is used to preserve value. But, in future, cases where the buyer is a connected party – such as existing directors or shareholders – will be independently scrutinised in a bid to protect the interests of creditors.

The government has said the laws will improve confidence and transparency around pre-pack sales and give "the general public and creditors reassurance that their interests are being protected alongside that of the distressed business".

Minister for corporate responsibility Lord Callanan said: "Pre-pack sales play an important role in rescuing viable businesses, while protecting jobs and supporting our economy.

"As we continue to tackle Covid-19, it is more important now than ever that people have confidence in the insolvency process.

"This new law will ensure all sales to connected parties are properly scrutinised, protecting the interests of creditors and the general public, as well as the distressed company."

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