'Pre-pack' administrations face stricter controls

Against the backdrop of recovering economic meltdown, and the plethora of high-profile retail failures, several of which resulted in pre-pack sales (e.g. Whittards, The Officers Club and USC) – is it any wonder that creditors and indeed the public have come to an increasingly cynical view of “revolving door” or “cosy” arrangements between accountants and those who may or may not have been directly responsible for a business’ collapse?

The pre-pack system allows the healthy part of a business that has gone into administration to be sold off quickly, so it can keep trading and paying its staff. Although there’s much publicity about the economy moving out of recession, many companies continue to face threats from landlords, HMRC, the banks and creditors. Directors in construction companies are also facing increasing concerns regarding wrongful trading and their own personal risk. Together with these concerns, are claims that directors of failing businesses sell it to themselves, at a knock-down price, to free-up debts, leaving creditors in the lurch.

For more, read Lisa’s blog.