Comments on: Pre-packs are a legalised scam http://dofonline.co.uk/blogs/the-edge/business/pre-packs-administration-4522588/ Richard Northedge takes on corporate finance Tue, 22 May 2012 03:56:19 +0000 http://wordpress.org/?v=2.5.1 By: Mark Sheldon http://dofonline.co.uk/blogs/the-edge/business/pre-packs-administration-4522588/#comment-10131 Mark Sheldon Wed, 16 Sep 2009 13:45:23 +0000 http://dofonline.co.uk/blogs/the-edge/?p=391#comment-10131 Once it is identified that a company is insolvent no further trade should occur that would harm creditors interests whilst the situation is reviewed. Payments must not be made that would imply a preference between creditors. If a pre-pack is viable the assets & undertaking must be independently valued. SIP 16 has identified that there is a conflict of interest between the IPs duty to creditors and advising Directors on their personal position - hence Directors should be advised to seek impartial advice. Faced with a potential structural recession many previously well run companies are finding their circumstances altered beyond which anybody could reasonably have predicted. The entire asset base of the UK needs revaluing to reflect changing circumstances. The pre-pack is often the most practical current way of resolving insolvency when there is a potentially viable core. The Directors frequently have to raise personal finance to recover the business which provides "hurt money" for the deal. Once it is identified that a company is insolvent no further trade should occur that would harm creditors interests whilst the situation is reviewed. Payments must not be made that would imply a preference between creditors. If a pre-pack is viable the assets & undertaking must be independently valued.

SIP 16 has identified that there is a conflict of interest between the IPs duty to creditors and advising Directors on their personal position - hence Directors should be advised to seek impartial advice.

Faced with a potential structural recession many previously well run companies are finding their circumstances altered beyond which anybody could reasonably have predicted. The entire asset base of the UK needs revaluing to reflect changing circumstances. The pre-pack is often the most practical current way of resolving insolvency when there is a potentially viable core. The Directors frequently have to raise personal finance to recover the business which provides “hurt money” for the deal.

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