Pre-Pack Pools in Administrations
On 2 November 2015, the new process for pre-pack sales of businesses by companies about to go into administration will come into force.
Under the provisions of the new SIP 16, if a connected party (i.e. directors or shareholders of the company going into administration) wishes to purchase a business that is about to go into administration, then it is recommended that they apply to the pre-pack pool, who will review their application.
The pool will open from 2 November 2015, and applications can be submitted via an on-line Portal here and the application will be considered by a pre-pack pool reviewer. This website also has a useful FAQs section.
The reviewer can give one of three outcomes:
- The pre-pack purchase is not unreasonable; or
- The pre-pack purchase is not unreasonable, but there are minor limitations in the evidence provided; or
- Case for pre-pack has not been made out.
The connected party wishing to purchase the business will need to pay a fee of £800.00 plus VAT. Insolvency Practitioners will need to ensure that they notify any connected purchasers that they should follow the pre-pack pool process, and to ask that they receive a copy of the reviewer’s opinion to attach to the SIP 16 report.
Whilst the process of using the pre-pack pool is not compulsory, it will be considered to be best practice and therefore should be encouraged, in order to help ensure transparency for creditors.
After the introduction of the pre-pack pools, the Insolvency Service will cease to monitor compliance with SIP 16, and this will instead be monitored by the Insolvency Practitioners’ Regulatory Professional Bodies (“RPBs”). For all appointments made after 1 November 2015, all SIP 16 reports will therefore need to be sent to the RPBs, rather than to the Insolvency Service. For joint appointments, only one report will need to be provided, and this should be done by the lead IP to their RPB.