Trade body R3 has strongly refuted claims by the British Property Federation (BPF) that the retail insolvency system is unfair and underhand.
The BPF today released a statement slamming pre-pack administrations as “deliberately vague” and a means of reinforcing failure.
Landlords also warned that “tens of millions of pounds are being siphoned out of pensioners’ savings into the pockets of private investors profiting from retail failure”.
However, Lee Manning, vice president of insolvency trade body R3, insisted: “We do not accept the BPF’s assertions regarding ‘underhand’ dealings by insolvency practitioners (IPs), nor do we accept that the UK’s insolvency system is not fair.
“A pre-pack allows a potential sale when other options have run out, and maintaining some value in the ailing business is in everyone’s interests, including landlords.”
Manning explained that in January the government decided against introducing extra legislative controls for pre-packs.
He continued: “In a pre-pack, a purchaser is given a license to occupy a company’s premises by an administrator.
“This, at the very least provides a temporary tenant for the landlord, and that tenant is obliged to honour rental obligations unless varied by mutual agreement with the landlord.
“This gives the opportunity for a landlord to negotiate terms of a new lease with an incoming tenant while rent is still being paid.
“Unfortunately in an insolvency situation a business has no money, and so creditors, especially unsecured ones, are not likely to be satisfied with any outcome.”
Earlier today, the BPF had urged on the government to amend the IP’s guidance notes – the SIP16.
The body insisted IPs “must be clear which assets are part of the sale” and to change the guidance so it “frowns on any collusion” between the IP and the buyer or the agent.
Liz Peace, chief executive of the BPF, said: “In some of the most high profile retail insolvencies tens of millions of pounds are lost in pensioners’ savings as concessions are extracted from landlords of profitable stores by the new buyers of the insolvent company.
“The prime role of the IP in any rescue is to secure the best result for creditors, not to maximise the profits of the new company and we are becoming increasingly concerned that IPs are acting more in the interests of the buyers than creditors.”