Insolvency Service press release on pre-packs: tighter controls on the way
The Insolvency Service have published the following press release on pre-pack administrations:
"Publication of Working Copy of Draft Statutory Instrument on pre-packaged sales
Following a consultation last year, in March 2011, Edward Davey, the Minister responsible for insolvency policy, announced proposals to introduce tighter controls on pre-pack administration sales to connected parties. A working draft of a Statutory Instrument by which the legislative changes to the Insolvency Rules 1986 may be made is available here. Please note that this draft is subject to change following discussion with stakeholders. The explanatory note to the draft Statutory Instrument refers to the amended rules applying in England and Wales only. It is our intention to make similar amendments to the rules relating to administration in Scotland by a separate Statutory Instrument.
Since the announcement in March, and in response to concerns expressed by stakeholders, we propose that the additional controls on pre-packs should extend to liquidation. This is a purely preventative measure, intended to stop any migration of pre-packs from administration to avoid the new controls.
The measures may be summarised as:
1. Where a pre-arranged sale has been, or is in the process of being negotiated at the time of appointment, to record in the office-holder’s ‘consent to act’ document that the prospective sale price represents, in their view, the best value for creditors.
2. To require administrators and liquidator’s to give three days notice to all known creditors of the terms of any proposed sale, where the office-holder intends to sell a significant proportion of the assets of a company or assets which are necessary to the continuance of the business (or a significant part of the business) of the company to a connected party where there has been no open marketing of the assets.
3. Where a significant proportion of the assets of a company, or assets which are necessary to the continuance of the business (or a significant part of the business) of the company have been sold by the office-holder to a party (whether connected or not) before the administrator’s proposals or the liquidator’s first progress report have been issued, to require a detailed explanation and justification for the sale (analogous to that currently required by SIP 16) in the administrator’s proposals, to creditors or first progress report.
Any comments on the detail of the draft statutory instrument should be made in writing, by no later than 29 June, either by email to IPPolicy.Section@insolvency.gsi.gov.uk or to Insolvency Practitioner Policy Section, 3rd Floor, Zone B, 21 Bloomsbury Street, London, WC1B 3QB.
Insolvency Practitioner Policy Section
The Insolvency Service
16 June 2011"
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