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08/12/2017

R3's roundtable on the pre-pack landscape

In early October, representatives from government, the business community, insolvency regulators, and the insolvency and restructuring profession joined R3 for a roundtable discussion on pre-pack reforms – and where they go next. Teresa Graham OBE, author of the Graham review into pre-packs from 2014, also attended.

We’re now two years on from the introduction of the Graham reforms, and a government review of the reforms’ success and whether or not to exercise a reserved power to ban or regulate administration sales to connected parties is now underway. Our roundtable, sponsored by Squire Patton Boggs and held under the Chatham House rule, provided an opportunity for the profession and for other stakeholders to outline their views on the impact the reforms have had on the insolvency and business community.

It was encouraging to see widespread acknowledgement, both inside and outside the profession, of the value of pre-packs as a business rescue tool. There was acknowledgement from creditors that pre-packs were useful in the right situations and that engaged creditors were able to exercise oversight. There was recognition, too, that insolvency practitioners are pointing connected party purchasers towards the Pre-Pack Pool.

As notable as the support of non-insolvency stakeholders for pre-packs was the insolvency profession’s support for continued pre-pack reform.

The progress of reforms

The majority of the Graham reforms received praise from a variety of guests, particularly those reforms relating to pre-pack valuations and marketing principles.

Perhaps unsurprisingly, a significant proportion of the roundtable was spent discussing the Pre-Pack Pool. While there was support for the Pool in principle, the low referral rate was seen as a cause for concern by many. Those present from the insolvency profession noted that creditor concerns about pre-packs remain despite the Pool, and that concern about the risk of receiving a negative opinion from the Pool was deterring connected parties from making a referral. Pool improvements were seen as necessary.

Views on exactly how to do this were mixed. A suggestion of opening the Pool up to non-connected party pre-packs was not greeted with universal acclaim, for example.

However, there was support from those present for making the Pool a mandatory process for the connected party purchaser. This, it was felt, would provide the Pool with more teeth. Further, there were suggestions that the insolvency practitioner could have the option to provide additional information to the Pool to help it make its decision if they wished to.

A number of commentators suggested that more time is needed to properly asses the full impact of the reforms, although with the Government’s power to make any changes expiring in three years’ time, and its review into the performance of the reforms now underway, there is no longer any time left to delay.

Where next?

The creation of the Pre-Pack Pool and the Graham reforms as a whole have played a vital role in improving trust and transparency in the UK’s insolvency and restructuring framework, and R3 is keen to ensure that the reforms are as successful and effective as possible.

There is support for pre-packs out there, but there is an appetite for continued reform, too. This is certainly R3’s own view, and it was encouraging to hear it echoed by others inside and outside the profession. Hopefully the roundtable will have given the government plenty of food for thought for its review.

Notes to editors:

  • R3 is the trade body for Insolvency Professionals and represents the UK’s Insolvency Practitioners.

  • R3 comments on a wide variety of personal and corporate insolvency issues. Contact the press office, or see www.r3.org.uk for further information.

  • R3 promotes best practice for professionals working with financially troubled individuals and businesses; all R3 members are regulated by recognised professional bodies
     
  • R3 stands for 'Rescue, Recovery, and Renewal' and is also known as the Association of Business Recovery Professionals.