Is Pre-Pack Administration Right for You - Finance - BankruptcyIs Pre-Pack Administration Right for You? by Colin O'Donnell
in Finance / Bankruptcy (submitted 2012-12-18)
There are many businesses that are in financial difficulty. They may be struggling but there is help available in the form of tool better known as â€œPre-Pack Administrationâ€.
So what does Pre-Pack Administration mean? As soon as an administrator is appointed the company is sold to a new company. If the directors of the newly formed company are exactly the same as the previous company then to prevent any abuse to the company additional scrutiny is required.
It is vital a company takes advice so that is can continue to trade without disruption. If a company that was struggling decided to carry out trading while in administration many issues could arise such as key stakeholders such as employees, suppliers and customers may not stay loyal to the company.
Administration is a lengthy process and means appointing an insolvency practitioner who will take control of the company and administer interests with creditors such as dealing with outstanding payments.
There are a number of ways of tackling administration and pre-pack is just one example. Other solutions include restructuring the company, taking out a Company Voluntary Arrangement (CVA), and sell assets before the liquidation.
Pre-pack Administration will sell assets immediately as soon as an administrator is appointed. It is important to note they will not then trade the company.
The old company (pre administration) keeps all liabilities and these don't just include outstanding payments to creditors but also lease agreements in place. Employment contracts can also be terminated. It is best to take specialist advice regarding employment because employees are protected.
There are massive advantages of Pre-Packs. These include allowing the new company (post administration) to continue to trade without carrying any of the debt from the old company and maintain stakeholder relationships.
It is highly advised though before using this method that consultation is made with the insolvency practitioner. They will also check to make sure that the assets are not sold less than their net book value (NBV) or in simple terms their worth. They will be valued independently.
There can be an issue when funding pre-packs as there is a need to have start-up capital. This may be difficult to obtain especially as these previous company went into administration because of financial difficulties.
When trying to buy a new business funding can most often be obtained from the bank. It is worth noting funding will include buying the business plus working capital so that the business can start running. Working capital include inventory. Remember that creditors from the old company will very likely be wary of supplying credit since the old company has gone into liquidation and may still have outstanding debts.
A new company may have to source credit from elsewhere or find up front.
HMRC can be another barrier. HM Revenue and Customs (HMRC) can ask the new company for a deposit to cover PAYE payments and any potential VAT liabilities. HMRC can potentially ask for six months in advance. This is especially the case if directors are identical for both companies.
In regards to creditors a pre-pack can be beneficial to them. A quick sale of assets at the right value can mean a good return to creditors who would otherwise potentially be faced with getting no repayment for their invoices.
A business that is struggling and put into administration without the use of pre-pack can cause a dramatic increase in the value of the business, mainly due to disruption and loss income.
Pre-Pack Administration is a good choice to preserve relationships and goodwill without all the start up costs that are usually associated with a new business venture.
A to Z of Indian Age of Authoritarian Democracy Communication Effect Communication Skills A Vehicle On The Road Corporate Governance Investing in the Emerging Daily Politics Blog How to Find Democracy at Its Best E Governance Election of the President of Pakistan Five Tips For the Best Queen Friendship and Politics Can They Mix Government Bids Top 10 Tips Government Contract Proposal Writing Tips Handle the Argumentative Communicator and Difficult How Ancient Greek Democracy Worked How Does a Bee Become the Queen If President Obama Were My Patient Ignoring Importance Of Communication Is A Direct Importance of an Effective Community Relations Introduction and Brief History Is President Obama Channeling President Richard Issues Which Are Plaguing Local Self Government In New Jersey Monkey Cage Democracy Moving to Queens New York O P Bhatnagar A Poet Perestroika and Democracy in Russia Political Discourse and Participatory Politics The Ugliest Fascination on Earth Post capitalist Free Market Economy President Barack Obama Must President Bush and Pyramid Numerology Problems In Managing Government Purim Why Did the Womanizer Queen Bee Rearing Queen Hatshepsut Egypts Queen Queen Honeybees Are Made Not Born Queens of Amsterdam Quest for Democracy in Ethiopia Secrets to Becoming a Master Serious Defects in Modern Democracy Seven American Presidents Have Uranus Six Myths of Effective Communication The 2008 Election Results Dysfunctional The Art of Communicating The Government GIP The History of Cornish Independence The Meaning Of Queen The Pope And The President The Role of Government The Significance of the Queen The Top Five US Presidents Top 10 US Presidents True Democracy US Government Sales Marketing US Presidents That Went to Harvard Understanding the Communication Process The Key to Organisational What Is The Best Suitable What is Political Science Where Now For European Why Workplace Politics Charts the Path
5 Major Benefits of Leasing A Basic Guide To Generating Revenue Apartment Property Management Audi Business Leasing Automated Recoveries Key Can Property Management Make a Finance Difference Commercial Agents Sales Presentation Commercial Property Management Commercial Property Contract Hire Information Do You Need Property Management Does Employee Leasing Make Sense Dubai Property Management Employee Leasing Lover Employment Leasing HR Management Expediter Truck Service Financial Analysis for Workplace Lease Five Considerations of Hiring Property For Property Management Jobs Freehold And Leasehold Property Government Bidding Glossary (pt 1 2) Green Car Scheme How Property Owners Benefit How To Break Apartment Lease How To Evaluate Management Software Importance of Lease Abstraction Internet Based Lease Accounting Is Pre-Pack Administration Right for Finance Lease Administration Software Lease Management Software Lease Or Get Property Lease Your Next Car or Fleet Leasing Office Equipment Leasing Software And Fleet Management Let The Property Management Do the Job Make Finding a Property Easier Make Finding a Property Management Company Make Property Management Effective Oklahoma City Property Management Companies Property Management Company for Business Property Management Fees Explained Property Management on the Rise Renegotiating a Commercial Lease Shopping for a Property Tenants Obligations Under Commercial Property The Best Atlanta Apartments The Evolution Of Property Top 9 Questions to Ask Uncover Which Property Management Jobs Waterloo Property Management What Is Staff Leasing What Type Of Property Owners Look For What You Will Get From Property Why It's Important to Get Property Why You Need Property Managers orleans Property Management Company Why You Should Hire Manager Workflow Automation In The Leasing Empirian property management - Law
© Riverside Property Management