• What are the pros and cons of pre-packs?

    This is a difficult question to answer because every company is different. A pre-pack will work best when there is a viable underlying business and that a formal appointment (liquidation or voluntary administration) will not produce an optimal outcome.
    Pre-packs, if done properly, can have a range of pros, because they can allow an insolvent company to:

    • Restructure its operations
    • Give creditors a right of review through a liquidation or voluntary administration of Oldco
    • Decide its own fate (rather than leaving it up to creditors)
    • Avoid a firesale of assets (which may occur in a voluntary administration or liquidation)
    • Retain its goodwill

    However, pre-packs also have a range of potential cons:

    • Shareholders may need to advance fresh funds to buy the company’s assets
    • Directors may be suspected/accused of phoenix activity
    • The company’s reputation may be damaged
    • The process may not deal with underlying financial problems with the business

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