Pre-pack administration: control over pre-packs looks set to tighten further

The writing has been on the wall since Theresa Graham’s 2014 report on sales to connected parties – although the government hoped it might do enough with the introduction of the pre-pack pool, it reserved the right to take further steps if deemed necessary.

With very low uptake on the pre-pack pool and continuing concern over the secrecy of pre-pack sales (and whether they deliver the best returns for creditors), the government has indeed deemed it necessary to take further action.

The government published draft regulations in October 2020 which, if implemented, would either require creditor consent for pre-pack sales to connected parties (which for the reasons we set out in the attachment below, we consider unlikely to be utilised much in practice) or that connected parties get an independent opinion in relation to such sales to justify the terms of the sale – most crucially, the price. This looks set to increase the cost to connected purchasers but perhaps it will, finally, put to rest the long-running criticism of pre-packs.