Is Pre-Pack Administration the Best Way to Get Businesses Trading Again?

Pre-Pack Administration can help to keep a business trading by selling it to a director or member
of the company. It happens when the business is becoming insolvent and facing difficult financial
decisions and threats from various creditors. It involves selling while trading and completely legal to
do. However, it is not for everyone and there are pros and cons to the matter.

What Is Pre-Pack Administration?

An administrator is called in to oversee the process. This is usually a specialist in turning businesses
around or in insolvency. It helps to sell struggling businesses on in a short amount of time. It can
keep the business in the hands of the Board of Directors or be sold onto a third-party. Having a
specialist helps to avoid legal issues with being accused of trading wrongfully.

Helping Companies Stay in Business

The main advantage to opting for Pre-Pack Administration is that the company remains in business.
Trading does not stop even while it is changing hands. There are no penalties for trading as long as
the law is followed and this involves contacting an Insolvency Practitioner.

The owners continue to have a voice during the changing of hands, unlike with other insolvency
options. It will be up to the business owners whether the company should be sold to certain
individuals or teams. This often involves negotiations so the business owners can help to see the
original vision continue.

Continuity for the Staff

Businesses changing hands can be a scary time for all the people involved, especially the employees.
They have little say in the matter and worry that they will find themselves out of a job. A Pre-
Packed Administration where the current owners have a say in who buys helps to ease the thoughts,
especially if the business is purchased by someone on the Board of Directors or within the company.
The employees will be less fearful about losing their jobs or that the company will completely
change.

Improved Cash Flow
When new owners come in, they may have better money management skills. This helps to improve
cash flow. Problems with cash flow are common issues with businesses that go insolvent and run
into financial difficulties. This helps the new owners clear the current debts while keeping up with
their own payments every month so that the business can continue trading into the future.

Difficult to Get Future Credit

There have been companies that have abused this system in the past and it can make getting credit
in the future more difficult. Some lenders refuse to deal with the new owners after having debts written off. This can affect future trading but it is worth remembering that there are other finance
options and ways to improve cash flow.

A Pre-Packed Administration offers many benefits for businesses. They allow the business to
continue trading and can improve cash flow problems. There is the issue of future credit but over
time a new credit history is built. This may be the best option for a business so that it can continue
trading and reduce the worry for others within the company.

Author bio:

Alex has supplied various pieces of content for  Real Business Rescue. She writes on many business
topics, including tax, insolvency and improving cash flow. Real Business Rescue is run by insolvency
professionals who offer advice to business owners to avoid and overcome cash and trading
problems.

1 comment:

  1. It is always painful and disturbing to face the situations of financial crisis and debt. However, you can either go for debt consolidation, or simply try to undergo pre-pack administration to prevent forced bankruptcy.

    ReplyDelete