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IPs must be "satisfied" pre-packs are best option 27 April 2012

Insolvency practitioners (IPs) should “satisfy” themselves pre-packs are the right course of action before embarking on the process.

The controversial measures have previously been criticised for allowing failed businesses to resume trading debt-free and at the expense of their creditors.

Ernst and Young partner, Maurice Moses, urged IPs to act with integrity before opting to pursue a pre-pack administration solution.

Speaking at the IPA Annual Conference 2012 Moses said: “I have to satisfy myself it’s the right thing to do – just stop and think and satisfy yourself this is the right course of action.

“I know from a PR perspective it’s a deal done five minute to midnight in a dark room.

“You can understand why people feel suspicious about the transaction that’s taken place.

“Our job is to throw some sun light on the process and explain the good reasons why we are part of that transaction.”

Meanwhile, Philip King, chief executive of the Institute for Credit Management, said IPs should explain clearly the reasons behind the pre-pack.

He commented: “SIP 16 is a big issue for us, we want to see paragraph eight complete more than the tick boxes.

“We want to see the reason why. We want to understand why the pre-pack is the right solution.”

However, Joint Insolvency Committee chairman and KPMG partner, John Milsom said the government must educate company directors more about insolvency and the role of pre-packs.

He argued there have been cases where directors of distressed businesses have shopped around until hitting on an IP who would agree to carrying out questionable pre-packs.

Milsom added: “The Insolvency Service has an issue with the small ones (pre-packs) where it seems to be a done deal, where it’s not advertised and it’s poorly explained by the IP.”

 

 

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