Pre Pack Business Sales

With proper advice in many instances it is possible to have such a re-packaged sale thereby safeguarding jobs, your future and indeed maximising returns to creditors.

A pre-packaged sale of the business (or pre pack as they are more commonly referred to) is a process whereby a sale of the business and assets of the floundering company is agreed with a phoenix company. Often this is set up and managed by the existing directors and/or management team, prior to the appointment of an Administrative Receiver or Liquidator.

Funding for the phoenix company is secured in advance, to enable the sale to be completed immediately after the formal appointment of an Administrative Receiver or Liquidator.

We frequently arrange pre pack's on behalf of our clients, where it is evident a refinance is not commercially viable in the "old company".

Our staff are experienced in most areas of business turnaround, corporate finance and fund raising.

We are not insolvency practitioners! as such our motivation is "rescue" rather than "burial" however as part of the pre pack process do we work in conjunction with a small number of "commercially aware" insolvency practitioners to achieve the most desirable outcome for our clients.

Our role in arranging pre packs is pivotal, and will include:

  • Advising the troubled company of the options available
  • Preparation of financial models to ensure that the phoenix company will be viable
  • Introduction to an appropriate Insolvency Practitioner
  • Formation of the new phoenix company (if required)
  • Negotiating an acquisition price with the Insolvency Practitioner
  • Sourcing funding for the phoenix company

We call upon the resources of our Commercial Finance Brokerage, to source innovative funders who are sympathetic to the Pre Pack concept and are aware of the commercial necessity to complete the deal quickly.

Crown Preference

On the 15th September 2003 the rights of crown creditors to claim unpaid VAT and unpaid PAYE with "preferential" priority was abolished. There is now a different order of priority as to "who gets what" in any insolvency process.

Debenture holders (usually the bank) rank ahead of unsecured creditors (these now include PAYE and VAT) . So if you have personally guaranteed your company bank liability this could be good news, as any purchase of the assets by the phoenix company will be used to reduce the bank debt in the 1st instance and thereby reduce the amount of debt that you will have to settle personally with the bank.

Use of Name

A director or shadow director of the liquidated company should not be involved in the management or formation of the phoenix company without first serving formal notice on all known creditors of the liquidated company.

It is recommended that legal advice is taken in respect of this matter, to prevent the directors of the phoenix company being personally liable for the new companys liabilities.

To Summarise...

A pre pack business sale can safeguard jobs, your future and indeed maximise returns to creditors. We frequently arrange pre pack finance on behalf of our clients, where it is evident a refinance is not commercially viable in the old company.

Contact Sterling Capital Reserve regarding you Commercial Finance requirements