Author: Barry Stewart, Personal and Corporate Recovery Specialist and Director at 180 Advisory Solutions Limited (see whole article).
Continued from part 2
What about pre-pack sales?
Unfortunately, it can get even more complicated with pre-package (pre-pack) sales.
A pre-pack sale is where the sale of the business has been agreed before the insolvency and is completed immediately upon the appointment of the insolvency practitioner.
This means the business was probably not exposed to the market in a sale process and it is often the original business owners who buy the business back.
It is, therefore, easy to understand why an outsider/creditor will question whether this was the right thing to do.
There are very strict rules and regulations surrounding this sort of process but rather than bore you with the technical details I’ll simply say that the insolvency practitioner, as in all insolvencies, still has to be able to prove that this provided the best outcome for creditors and that trading the business in insolvency and taking time to market it publicly simply wasn’t possible or would have reduced the price that was achievable.
Is your business in trouble?
The insolvency industry has a bad press image. Normally the press only reports the bad news in relation to insolvencies, concentrating on the jobs lost rather than the jobs saved, the shutdowns rather than the going concern sales.
The successes — the businesses that have been rescued and jobs that have been saved — simply don’t get column inches because that doesn’t sell papers. Also, much of the rescue work carried out by insolvency practitioners is done behind the scenes and is confidential.
Administration or any type of Insolvency does not mean the end.
Businesses (or parts of them) successfully exit administration or insolvency every week, saving tens, hundreds or thousands of jobs.
Ultimately, the success of a rescue will come down to the skill and experience of the insolvency practitioner appointed. Choose the right person and they will be able to save a business — so long as there’s a viable business there.
The most important thing for directors and business owners is to seek help as soon as you suspect your business is in trouble. The more time an insolvency practitioner has to work with you, the more likely they are to achieve a positive outcome.