An independent review of the process of ‘pre-pack’ administrations is to be conducted by the government.
Announced during a parliamentary debate, the review will take place in late spring following a flurry of concerns from creditors.
A spokesman for The Insolvency Service, said the government has listened to the concerns about pre-packs and introduced measures to increase transparency and prevent abuse.
He added: “Strengthened measures are being introduce to improve the quality of information insolvency practitioners are required to provide on pre-pack deals and we are using targeted monitoring of outcomes to assess whether there is evidence of abuse.
“Used appropriately, pre-packs can be a highly effective process to ensure the best deal for creditors by better enabling the rescue of businesses, preserving value and safeguarding jobs.
“The independent review announced by the Minister will enable further evidence to be assembled on how pre-packs are working in practice and whether further steps are needed.”
There are measures in place to ensure that the privilege of limited liability is not abused.
The Secretary of State can seek the disqualification of a director where he believes it to be in the public interest to do so. A succession of company failures will be a factor taken into account in deciding whether to take such action.
During the year 2011-12, The Insolvency Service secured over 1,200 disqualification orders and undertakings against directors of failed companies, with an average disqualification length of 5.9 years.