Trade body R3 claims pre-pack rules could lead to a hike in insolvencies

Published on September 7, 2011 by Crawfords Accounting

According to R3 new Government proposals to introduce a three-day notice period for pre-pack sales could be at the expense of unsecured creditors as businesses turn to liquidated instead.

The sometimes unpopular pre-pack has come under regular fire from creditors calling for greater transparency. However in certain cases, a pre-pack has been extremely helpful in saving jobs and value in the business which might otherwise have depreciated or been lost completely.

Andrew Walker from R3 said: “Any measure that boosts confidence in the pre-pack procedure is to be broadly welcomed. However it is important to note that a pre-pack is chosen due to the speed of the procedure which helps preserve the value of the business.”

According to the government’s monitoring report on pre-pack compliance, there is “no reliable evidence to suggest that misconduct by directors is any more prevalent in pre-pack cases than in conventional administrations”.

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