The new Statement of Insolvency Practice 16 in England and Wales will make it mandatory that administrators disclose detailed information to creditors before and after a pre-pack administration.
The new guidelines have been developed over the past year and will come into force on 1 January. The guidelines will stipulate that in all cases of pre-pack administration, the administrator will have to disclose to creditors information including the source of their initial introduction and any connection between the purchaser and the directors, shareholders or secured creditors of the company.
Pre-packs have come under scrutiny as a company is typically put into administration and quickly bought out by its new owners with reduced liabilities, such as stores or stock. Some deals have left creditors in the lurch.
Begbies Traynor managing partner Paul Stanley told The Independent: “The accusation that has been levelled at the [insolvency] profession is that sometimes procedures have been abused by lazy insolvency practitioners and therefore the regulators of insolvency practices have brought out these new guidelines.”
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