Pre-pack insolvency practice has had much bad press of late. Tenon Recovery has come out fighting and said that it can help to avoid the “domino effect” of suppliers to the business going bust. Critics have argued it has allowed owners of businesses to buy back their companies with most of the liabilities released, so leaving creditors out of pocket.

Tenon has identified six major benefits to the pre-pack insolvency route that must be considered.

So there we have it, a pre-pack is the best way forward. Or is it?

The problem is that with a pre-pack it can be difficult to argue there would have been a better outcome if the business was put up for sale to invite best offers. It can be argued that once the business had gone into administration all goodwill would have been lost, suppliers would have pulled the plug, and the value of the business and hence the chance of the creditors being paid off would have been reduced. But hey we have no way of knowing… Of course, the other problem with delaying any resolution is if the previous owner/manager tabled an offer for the business that was rejected and then the business completely failed then the knives would be out for the administrators and the lawyers would be sharpening their pencils.

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Tags: , business for sale, buy business, creditors, insolvency, pre-pack administrations

This entry was posted on Friday, January 16th, 2009 at 6:41 pm and is filed under Business News, Corporate Insolvencies, Selling a Business. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.