Pre-pack administration
A pre-pack administration is where the sale of a company's 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. Because the buyer is often connected to the existing directors, the procedure is tightly regulated. Administration (Restrictions on Disposal etc.) Regulations 2021
- What it is
- A pre-arranged sale completed as the company enters administration
- Aim
- Preserve a viable business, jobs and goodwill
- Connected buyers
- Need an independent evaluator opinion (2021 rules)
- Oversight
- A practitioner must judge it the best outcome for creditors
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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, and the business often continues with little visible interruption. Pre-packs are legitimate and sometimes the only way to save value, but because the buyer is often a connected party they attract scrutiny.
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. Done properly, with transparency and proper valuations, it is a valid rescue tool; done carelessly it invites challenge. A practitioner will advise whether it is appropriate and how to do it correctly.
Related data
Our 2025 insolvencies by type breakdown: Administration volumes against the other insolvency routes. Every page on our data hub names its official source.
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 aren't needed, affected employees may be made redundant and can claim statutory payments from the Redundancy Payments Service.