Role of Insolvency Practitioners in Pre Pack Administration

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Insolvency practitioners play a crucial role in the pre-pack administration process. A pre-pack administration is a process in which a struggling company is sold to a third party before or immediately after it enters into administration. The process is usually initiated by the directors of the company or by the administrator appointed by the court. In this blog, we will discuss the role of insolvency practitioners in pre-pack administration.

Appointment as administrator

The first role of an practitioner in pre pack insolvency (administration) is to be appointed as administrator. The administrator must be a licensed insolvency practitioner who is qualified to manage the pre-pack process. The insolvency practitioner’s role as administrator is to take control of the company’s affairs and manage the pre-pack process in accordance with the Insolvency Act 1986 and the Insolvency Rules 2016.

Conducting an independent valuation

One of the key roles of an insolvency practitioner in pre-pack administration is to conduct an independent valuation of the company. The insolvency practitioner must obtain a valuation of the business from a qualified and independent valuer, in order to ensure that the sale price is fair and reasonable. The valuer must take into account the market value of the business, as well as any liabilities or risks associated with the business.

Ensuring compliance with insolvency legislation

Another key role of an insolvency practitioner in pre-pack administration is to ensure compliance with insolvency legislation. The insolvency practitioner must comply with the Insolvency Act 1986 and the Insolvency Rules 2016, which set out the procedures and requirements for administration. This includes ensuring that all stakeholders are treated fairly and transparently, and that the pre-pack sale is conducted in the best interests of the company and its creditors.

Consideration of alternative options

Before proceeding with a pre-pack sale, the insolvency practitioner must consider alternative options for the company. This includes the possibility of restructuring or refinancing the company, or selling it through a conventional sale process. The insolvency practitioner must be able to demonstrate that a pre-pack sale was the best option for the company, and that it was in the best interests of all stakeholders.

Engaging with stakeholders

An insolvency practitioner in pre-pack administration must also engage with stakeholders throughout the process. This includes creditors, employees, and other stakeholders who may be affected by the pre-pack sale. The insolvency practitioner must provide a report explaining the circumstances leading up to the pre-pack sale, as well as details of the sale process and the value obtained for the business. The insolvency practitioner must also ensure that the pre-pack sale is not conducted for the benefit of one or more secured creditors, to the detriment of other creditors.

Ensuring compliance with company law and employment law

Finally, an insolvency practitioner in pre-pack administration must ensure compliance with company law and employment law. This includes ensuring that the directors of the company act in the best interests of the company and its shareholders, and that employees are treated fairly during the pre-pack sale process, and that their rights and entitlements are protected.In conclusion, insolvency professional or practitioners play a critical role in the pre-pack administration process. Their role includes appointment as administrator, conducting an independent valuation, ensuring compliance with insolvency legislation, considering alternative options, engaging with stakeholders, and ensuring compliance with company law and employment law.