The Relevance of Pre Pack Administration

The whole issue of pre pack administration is drawn from the intention of the company's top management to salvage the company from collapse. The company can be struggling with business liabilities and manage to rise on its feet and start moving again if the process of pre pack can be undertaken accordingly. This is where the company directors opt to form another company as a new separate entity. The old company transfers all its useful assets to the new company as a way of disposing them. When this process is completed, the directors file the notice of dissolution. Through this way, the company is wound up.

There are several reasons why the option of pre pack is taken. These includes the fact that the company is strained by business debts that it cannot meet. In this case, the business is faced with serious threat of collapsing. This is as a way of giving the business the new beginning and the new face in terms of liquidity. All the assets are acquired by the new company while the liability remains with the old company. This gives the new company the strength to operate in the market without hassle from previous creditors.

Pre pack administration can be conducted if the directors can prove the following conditions. The company must be under threat of being wound up by way of notice, the bailiff must have issued the notice of auctioning the properties of the company in question due to huge debts, the landlord of the premise must issued the warning of interrupting the business due to unpaid bills, the three quarter majority of the shareholder must have consented on liquidation, appointment of an administrator by the debenture holder and the company must be time barred. These conditions should be fulfilled to facilitate the administration of pre pack process.

Pre packing is the process which requires to be done in sequential manner. When the company meets the above conditions and directors are convinced that this is the only option, they may start by forming the new entity. The administrator is appointed after the new limited company is fully registered. The process of disposing the assets of the old company to the new entity begins. The administrator then calls for the meeting of all creditors to inform them about the disposal. The administrator introduces the agenda of winding up the company and proceeds of transaction are shared among them.

The law requires that the directors of the old company to pay all taxes to the customs authority to become the directors of the new company. Also, the administrator must be qualified and licensed insolvency practitioner. The transfer of assets from the old company to the new one is done through legal sales agreements which are drawn by the administrator. The liquidation of the old company takes effect upon the consent of the creditors.

Pre pack administration has a number of merits. The company is able to retain its workforce, suppliers and customers. This makes the company to sustain itself in the market. This is far much better even to the country's economy than the business collapsing and workers losing their employment.