Pre-pack legislation could delay proceedings and prejudice ability to conclude a deal’

A Midlands insolvency expert is urging the Government not to consider legislation on controversial pre-pack administrations.

Martin Coyne director at Poppleton & Appleby, which specialises in business recovery and insolvency, has commented on the issue after a review into pre-pack administration arrangements called for voluntary scrutiny of deals.

The recommendations centre on an independent ‘pre-pack pool’ where details of a proposed sale to a connected party can be shown to an independent person prior to the sale taking place.

A pre-pack administration is where the sale of the business is marketed prior to the company entering administration and subsequently sold on the appointment of administrators – often to the existing owners or directors.

Regulation expert Teresa Graham, who was commissioned by Government to carry out the review hopes that the new proposals will increase transparency, fairness and boost creditors’ confidence.

Business minister Jenny Willott has said the government would introduce a range of voluntary measures, with a view to legislating at a later date “if necessary”.

Coyne, who has more than 25 years’ experience in refinancing and insolvency, has welcomed the new proposals but is concerned that additional legislation could impede on practice.

“As industry specialists we would effectively welcome any recommendation that adds to the credibility of our profession,” he said.

“Measures that improve what we do and that also improve the perception of our profession to the outside world have to be welcomed.

“However, I do worry that these recommendations could delay matters and could prejudice our ability to conclude a deal.”

He added: “We are already heavily legislated and monitored and in a commercial world sometimes deals need to be done very quickly to preserve the value of the business and to save jobs.

“Many companies that enter insolvency are sold back to the previous management as they are very often in a better position to make an offer for the business than somebody coming in from the outside.

“Under these new proposals we are not yet sure exactly who will be involved in the scrutiny process and although the panel will be expected to spend no longer than half a day reviewing a pre-pack proposal I feel it may be difficult to keep to that schedule.

“There is always independent scrutiny and verification throughout the insolvency process so I do feel a bit frustrated when people think that we aren’t doing our job properly.

“Unfortunately, people often have a negative perception of pre-pack procedures so we hope this report will help to dispel some of these myths.

“We hope that these new measures will prove sufficient so as to prevent additional legislative measures being introduced in the future.”