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Government’s U-Turn On Pre-Pack Changes Welcomed By Insolvency Expert

Ministers Rethink Plans On Regulations


An insolvency specialist at Irwin Mitchell has welcomed news that the government is no longer intending to review regulations in relation to pre-pack administrations.

Ministers had been considering changes to current regulations which would have meant creditors would need to be notified in advance of such a deal and also allow three days for proposals to be challenged.

However, the Government has now confirmed it is not convinced of the benefits that a change in regulations would offer.

Commenting on the decision, Andrew Walker, Partner and insolvency specialist at Irwin Mitchell, said: “We welcome the Government’s decision to reconsider additional pre-pack legislation. The Government originally announced they would give creditors a three day notice period when selling a business to a connected party.

“A pre-pack is chosen due to the speed of the procedure which helps preserve the value of the business. The changes would have led to more businesses closing, job losses and unsecured creditors losing out as more businesses would have been liquidated instead of pre-packed.

“We are pleased Government has listened to the fact that improvements to the current pre-pack regime can be achieved through tweaks to the existing regulatory framework instead of additional regulatory burdens which would cause harm to businesses and their employees. R3 has been vocal about the effect these proposals would have on micro businesses and SMEs, which the Government has now recognised. 

Andrew, who is also chair of R3 in Yorkshire, added: “R3 welcomes increased transparency and confidence in the pre-pack process and looks forward to working with Government to address creditor concerns surrounding pre-packs.

“Pre-packs are a vital rescue tool which fare considerably better than alternatives in terms of the retention of jobs and returns to secured creditors; this is crucial as the UK economy heads closer to another recession after the 0.2% decline in the UK's economic output.

“We also urge the Government to define ‘expenses of administration’ which would help save thousands of jobs and businesses that enter administration every year. R3 has long campaigned for the implementation of legislation to clarify an expense of administration to improve the UK’s business rescue culture.”