Article

Regulations adopted to tighten control over pre-packs

Published Date
Oct 1 2021
As we stand facing another potential financial crisis, the UK adopted new regulations which tighten the screw to control pre-packaged sales to connected parties.

The writing has been on the wall since Theresa Graham’s 2014 report on sales to connected parties – although the government hoped it might do enough with the introduction of the pre-pack pool, it reserved the right to take further steps if deemed necessary – and the time has come.

With very low uptake on the pre-pack pool and continuing concern over the secrecy of pre-pack sales (and whether they deliver the best returns for creditors), the government has indeed deemed it necessary to take further action.

The Regulations require creditor consent for pre-pack sales which constitute a substantial disposal to connected parties (which for the reasons we set out in the attachment below, we consider unlikely to be utilised much in practice), or that connected parties get an independent opinion in relation to such sales to justify the terms of the sale – most crucially, the price. This looks set to increase the cost to connected purchasers but perhaps it will, finally, put to rest the long-running criticism of pre-packs.

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Pre pack administration October 21

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