What is Pre-Pack Administration?
A pre-pack administration is a formal insolvency procedure where the sale of a company’s business or assets is negotiated and agreed before an administrator is formally appointed. The moment the administrator is appointed, the sale completes immediately.
The result is a business that keeps running with minimal disruption. Staff keep their jobs, contracts are preserved, and customers may notice nothing at all. The insolvent company is wound down separately – its debts stay with the old structure and do not follow the business into the new one.
Pre-pack is most commonly used where the business has genuine ongoing value that a conventional administration or CVL would destroy. Speed is often critical: once a company enters formal insolvency in the ordinary way, value can evaporate quickly. A pre-pack removes that risk by agreeing the sale in advance.
Ready to understand your options?
How Pre-Pack Administration Works
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Free Clarity Consultation
We review the business, its assets, liabilities, and trading position. We assess whether a pre-pack is viable and, if so, what the likely sale structure would look like. If pre-pack is not right for your situation, we will tell you clearly and explain what the alternatives are.
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Valuation and marketing
The assets to be sold must be independently valued. The appointed insolvency practitioner is required to demonstrate that the sale price represents fair value – this is a regulatory requirement designed to protect creditors. We manage this process and will explain what it means in practice for your business.
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Sale negotiation
The terms of the sale are agreed in advance of the administration. The buyer is often a connected party – the existing directors or shareholders – but can be a third party. The sale agreement is prepared and held ready for execution.
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Administration and immediate sale
A licensed insolvency practitioner is formally appointed as administrator. The sale completes immediately. The business continues trading under its new structure from day one.
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Creditor notification and wind-down
Creditors are notified of the sale within the required regulatory timeframe. The old company is wound down, with proceeds from the asset sale distributed to creditors in the prescribed order. The directors of the old company are subject to the standard conduct review.
Pre-Pack Costs and Fees
Fees are fixed and transparent with no hidden extras. The cost of a pre-pack depends on the complexity of the case – the nature of the assets, the number of creditors, and whether any regulatory complications arise – but you will always know the fee before you commit to anything.
In many cases, the fee is funded from the proceeds of the asset sale itself, meaning there is no direct out-of-pocket cost to the directors. We will explain the funding options clearly during the Clarity Consultation.
A Note on Connected Party Sales
Pre-pack sales to connected parties – where the directors of the insolvent company buy back the business or its assets – are entirely legal and are used routinely. They are, however, subject to greater scrutiny than third-party sales.
Since 2021, connected party pre-pack sales above a certain threshold require either creditor approval or an independent written opinion from a recognised body confirming the sale is reasonable. We manage this requirement as part of the process, so you are not left navigating the regulatory requirements on your own.
Pre-Pack vs CVL – Which is Right for You?
Pre-pack and CVL are both formal insolvency procedures, but they serve different purposes.
A CVL is the right route when the company is insolvent and there is no realistic prospect of saving the business – closing it cleanly is the best available outcome. A pre-pack is the right route when the business still has genuine value: a trading name, a client base, contracts, staff, or goodwill that is worth preserving. The goal is to transfer that value to a clean new structure while leaving the debt behind.
If you are unsure which applies to your situation, the Clarity Consultation is the right place to start. We will give you an honest assessment of both options – and any others that may be relevant.
