Mark Parkhouse & Kerry Scott on the criticism of pre-package administrations
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Insolvency issues are rarely far from the front page of most newspapers these days. In particular, the use of prepackaged administrations (pre-packs) has been the focus of vigorous recent criticism.
This article considers if the criticisms are justified and whether current provisions, including the Statement of Insolvency Practice 16 “Pre-packaged Sales in Administrations” (SIP 16) (which came into effect in England and Wales on 1 January 2009), will appease creditors' concerns.
Aims of administration
In order to consider pre-packs in context, it is first useful to recap on the aims which are imposed on administrators by legislation (Insolvency Act 1986 (as amended), Sch B1, para 3(1)):
(i) The prime objective—to rescue the company as a going concern; or
(ii) The second objective—to achieve a better result for the company's creditors as a whole than would otherwise be the case if the company were simply to be wound up (without first being
