A Pre-Pack Administration is where a sale agreement is made before a company enters the Administration process; as soon as the company is in Administration their assets are sold.
Since January 2009, when SIP16 was introduced, the process of the Pre-Pack has been much more transparent to the creditors. The SIP16 report is sent to creditors as soon as practicable after the sale has gone through, which has to detail a variety of information including the initial introduction of the appointed Administrator; valuations of the business or assets; alternative courses of action considered by the Administrator and why it was felt that the business could no longer trade. The report must aldo include any connection between the purchaser and the directors, shareholders or secured creditors of the company and the identity of the purchaser
However, a Pre-Pack Administration is not without risks. The main concern is that by not marketing the assets they could be missing out on a higher bidder, although it is the duty of the appointed Administrator to ensure that the assets are sold for a fair price within a Pre-Pack Agreement, which should allay creditors’ concerns.