Government commissions pre-pack review
By Hannah Jordan Monday, 18 March 2013
The Insolvency Service has announced an independent review which could see the revival of proposals to give creditors notice ahead of a pre-pack deal.
Further details of the review, such as its timescale and scope, will be announced in the spring when it is due to get underway.
The announcement comes just over a year after the government scrapped proposals, originally announced in 2011, to introduce a grace period during a pre-pack administration that would give creditors three days notice prior to any deal taking place.
At the time the government said that the introduction of new legislative controls did not outweigh the benefit of adhering to a moratorium, effective until 2014, on implementing new regulations for small businesses.
But industries, including print, have continued to lobby hard for greater controls to be implemented to stop the abuse of pre-pack administration deals, by increasing transparency and introducing a notice period that would allow creditors time to air any concerns.
The Insolvency Service said the review would enable further evidence to be assembled on how pre-packs were working in practice and whether further steps were needed.
A spokesman said: "Used appropriately, pre-packs can be a highly effective process to ensure the best deal for creditors by better enabling the rescue of businesses, preserving value and safeguarding jobs.
"The Government has listened carefully to the concerns of creditors about pre-packs and that is why we already have measures in place to increase transparency and prevent abuse.
"Strengthened measures are being introduced to improve the quality of information insolvency practitioners are required to provide on pre-pack deals and we are using targeted monitoring of outcomes to assess whether there is evidence of abuse."
In May the government is set to introduce a revised SIP16, information that must be provided by insolvency practitioners to creditors shortly after a pre-pack as taken place, which it claims will ensure that such deals can be made only where there is "strong justification".
However the revision has been broadly criticised for having no teeth, and while the latest review into pre-packs may be considered by some to be a positive move, there is scepticism about whether it will hold any weight.
BPIF chief executive Kathy Woodward said: "Of all the issues that are raised by our members this is the most emotive. We have lobbied long and hard on the subject and whilst there has been supportive rhetoric from government it never seems to translate into action. Not all pre packs are against the interest of the industry but too many are."
BPIF public affairs advisor Andy Brown added: "I’m pleased that they have announced another review because it shows there is continued concern about pre-packs.
"It is possible this could result in some modification but we have had so many false starts with this that it is hard to get your hopes up.
"We will most definitely want to have some input into this as it is a continuing issue in the print industry, so we wait with anticipation."
Gary Peeling Managing director, Precision Printing
Pre-packs were not designed to allow the previous poor management to dump debt and employment liability and carry on. With this law in place, business is a lottery and sharp practice is not limited to SMEs either, so I welcome the review. The acceptability of any pre-pack should be put before the people who effectively fund the business – its creditors and employees."
Jacky Sidebottom Director, Glossop Cartons
A grace period is a great idea but must be started with a transparent speedy advertisement of the company in a read publication that could attract offers from interested parties. The pre-pack may not be in the best interest of the creditors or employees and many are signed in a few hours without the administrator going to the open market."
Adrian Steele Managing director, Mercian Labels Group
Pre-packs should be a weapon of last resort for IPs but are too often used as the default option. The core problem is the decision not to sell assets before the pre-pack, which would often result in more cash for creditors. There is too much discretion with IPs, and this needs tightening to make a mandatory public marketing for, say, 24 hours."
Latest jobs Jobs web feed
- Print Buyer Pyramid Consultancy Ltd £25,000 - £30,000pa, company car, phone, lap top , London
- Print Estimator | Exhibition & Display Print | North West Mercury Search and Selection £25k , Manchester
- UK Sales Manager | Self Adhesive Labels | UK - Home Based Mercury Search and Selection £32k-£40k + Attractive commission structure, pension, life insurance, car, laptop & smart phone , UK - home based
- Account Director - Reprographics/ Mail Room - London asg Up to £45,000 + bonus + benefits, London
- Training Consultant Tharstern Ltd The package includes attractive salary, plus benefits., Nationwide
- UPDATED: St Ives hits the acquisition trail again
- HP Indigo users team up for mammoth Coca-Cola task
- Konica Minolta aims to add value with web-to-print deal
- Swiss Post acquires Pitney Bowes' UK and Ireland management services business
- Warwick Printing Company to install UK's first Speedmaster SX 102
- Standard Bank contract a "monster job" for BMC