Government pre-pack administration announcement, R3 response

08 October 2020

Colin Haig, President of insolvency and restructuring trade body R3, responds to the Government’s announcement that it will bring in new laws requiring pre-pack administration sales to be independently scrutinised:

“Having agreed that it should be mandatory for sales to connected party purchasers in pre-packs to be referred for an independent opinion, we broadly welcome the Government’s announcement. In particular, the Government’s decision not to ban sales to connected parties in pre-packs is the right one.

“Pre-pack administration sales involving connected parties are an important rescue tool as they are often the best way of preserving a business and maximising returns to creditors. The insolvency and restructuring profession is very sensitive to the impact of pre-packs on creditors, and there is a careful balance to strike in these situations between transparency, protecting creditor value, and business rescue, which these proposals support.

“We welcome efforts to enhance confidence and transparency in pre-packs, but these efforts should be balanced against protecting the valuable role pre-packs play. These reforms, while not perfect, should help to improve confidence in this important business rescue tool.”