Pre-Pack

A Pre-Pack has become quite a common feature in the rescue of a struggling business. 

Essentially prior to the formal appointment of an administrator the sale of some or all of an insolvent company's business or assets is negotiated with a purchaser who may be a third party or, more commonly, one or more of the directors of the insolvent company. 

At their best Pre-Packs allow a business to carry on trading and save jobs but they often have bad press because creditors do not like them and think that they are abused by the directors of the insolvent company who appear to be able to simply carry on as before but without paying the debts which have already occurred. 

The sale of the assets or business is negotiated before the administrator is in office but once appointed it is the administrator who carries out the sale. 

Often it is essential that the business is sold quickly if its value is to be preserved and this is particularly so when the value of a company is in its employees and the skills and knowledge that they have.  If they are concerned about their position and whether they will be paid, then they will often look for employment elsewhere leaving  the new business unable to provide services and complete contracts.