New Legislation on Pre-Pack Administrations

28 April 2021 
2 minutes
Debt Recovery & Insolvency

Pre-pack Administration sales, or Pre-packs, are a useful tool for rescuing a company in financial difficulty. However, in response to heavy criticism of pre-packs by many, in particular unpaid unsecured creditors, the government has introduced new legislation that places restrictions on the disposal of property by administrators, together with other conditions and requirements. These in effect create further hurdles for directors and owners of businesses who may have hoped to buy their debt freed business back out of insolvency.

The Administration (Restrictions on Disposal etc. to Connected Persons) Regulations 2021 will come into force on 30 April 2021 and will apply in England, Scotland and Wales. The Northern Ireland Assembly’s Committee for the Economy considered similar provisions, The Administration (Restrictions on Disposal etc. to Connected Persons) Regulations (Northern Ireland) 2021, on 14 April 2021.

Fundamental amongst the restrictions and conditions in the legislation is the mandatory eight-week window in which the assets of an insolvent business cannot be sold to a “connected party” without the consent of creditors or a report from an independent evaluator, who is appointed by the connected party.

The definition of connected person is already contained in Schedule B1 of the Insolvency Act 1986 and includes the directors, shadow directors, non-employee associates of those directors, non-employee associates of the company, or a company that shares such an officer with the debtor company.

The full legislation can be viewed here.

If you, as a creditor, or as a company considering its options, are affected by any of these issues or require insolvency advice and assistance generally please contact our Debt Recovery & Insolvency team to discuss.

Contact David

David McAlinden
Director
dmca@mkblaw.co.uk
028 9099 3116

Contact Billy

Billy Muir
Solicitor
wm@mkblaw.co.uk
028 9099 3147

Contact Ruairi

Ruairi Maguire
Trainee Solicitor
rma@mkblaw.co.uk
028 9099 3145

Share Article

This article is for general guidance only and should not be regarded as a substitute for professional legal advice.

Experienced

Our experience and expertise allow our team to provide an unrivalled service to all clients.

Personal

Our personal understanding ensures our clients are at the forefront of our services.

Flexible

Our team provides clear legal guidance to complement your business structure.

Specialised

Our clients span all industries, from technology to agriculture and hospitality to renewables.

Or please call us on 028 9024 2450 or email info@mkblaw.co.uk

MKB Law Solicitors Belfast is regulated by the Law Society of Northern Ireland. Content is copyright © MKB Law 2021. Terms & Conditions apply.