Pre-pack administration
A pre-pack administration is where the sale of a company business and assets is arranged before the company formally enters administration, and then completed by the administrator immediately on appointment. The aim is to preserve a viable business, jobs and goodwill that would be lost if trading stopped during a drawn-out process. The business often continues with little visible interruption. Because the buyer is frequently connected to the existing directors, the procedure is tightly regulated: since 2021, a connected-party purchaser must obtain an independent written opinion from an evaluator before the sale, and a Licensed Insolvency Practitioner must be satisfied the deal is the best available outcome for creditors. Pre-packs are legitimate and sometimes the only way to save value, but they attract scrutiny, so transparency and proper valuations are essential. A practitioner will advise whether it is appropriate and how to do it correctly. Administration (Restrictions on Disposal etc.) Regulations 2021
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Why pre-packs are used and scrutinised
A pre-pack can rescue value that would evaporate if a business simply stopped. But because the buyer is often a connected party, the rules now require independent scrutiny. Done properly and transparently it is a valid rescue tool; done carelessly it invites challenge. This is firmly practitioner territory.
The numbers behind this
See the live official figures on our insolvencies by type breakdown. Administration volumes against the other insolvency routes. All figures come from named official sources on our UK business distress data hub.
Common questions
Can directors buy back the business in a pre-pack?
Yes, but a connected-party sale must be backed by an independent evaluator opinion and a proper valuation, and the practitioner must be satisfied it is the best deal available for creditors.
What happens to debt in a pre-pack administration?
The old company enters administration and its debts stay with it, to be dealt with in the insolvency. The buyer purchases the business and assets, not the old debts, so the new company generally starts free of the old liabilities. Unsecured creditors of the old company are paid only from what the administration realises, which is why the sale price is scrutinised.
How quickly can a pre-pack administration be done?
The sale is negotiated before the company enters administration and then completed by the administrator on or shortly after appointment, so the business can change hands almost immediately. The preparation, valuation and, for a connected-party sale, the independent evaluator opinion usually take some weeks beforehand.
What happens to employees in a pre-pack administration?
Because the business continues, employees usually transfer to the buyer under TUPE rules, which protect their continuity of employment and terms. Where roles are not needed, affected employees may be made redundant and can claim statutory payments from the Redundancy Payments Service.