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Pre-pack review proposes independent inspection 16 June 2014

The long-awaited government-commissioned review of pre-packaged administrations by Teresa Graham has proposed potential prepack deals be scrutinised by a panel of “experienced experts” before going ahead.

The review, commissioned by business secretary Vince Cable in June last year, found that while pre-pack administrations can conserve jobs and reduce the costs associated with insolvency, there was a need for great for transparency and creditor confidence.

In the report, Graham said: “The pre-pack numbers are relatively small but the lack of transparency and trust in the process means that the ‘noise’ surrounding them is far greater than should be the case.”

Graham has proposed that a group of experienced professionals will review pre-pack deals that are brought to their attention, on a voluntary basis.

The move is designed to target pre-packs where a business is sold to “connected parties”, usually an existing company director, which under the new proposals would be required to publish a report to demonstrate the viability of the ongoing business.

There has been a positive response from both the government and the industry to the report.

Business minister Jenny Willott said: “When these types of business sales are carried out properly, they allow the viable parts of the business to continue operating and jobs are saved. But it is also important for those who are owed money to know they are getting the best possible deal in the circumstances. Transparency is vital.

“We will be working with business and industry to implement these recommendations in full and we believe it will help restore trust and confidence in pre-pack deals. We will monitor progress closely and will take the power to legislate if necessary.”

President of insolvency trade body R3, Giles Frampton, said: “Teresa Graham’s report is an excellent contribution to the pre-pack debate. We fully support her conclusion that there is a place for pre-packs in the UK’s insolvency framework.

“It is also encouraging to see the report’s recommendations focus on more than just the insolvency practitioner’s role in a pre-pack. Instead – and rightly – the report turns the spotlight on directors involved in a connected party pre-pack.”

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