Many of these directors had no problem – legal or moral – with using the Act to escape the legitimate claims of their creditors and continue trading as before, whereupon they found themselves free to run up new debts with anyone who would give them credit. In the print industry, certain companies became famous for having pre-packed multiple times, almost invariably ending up back in the hands of the administrators within a few years of their latest ‘rescue’ attempt. The practice of pre-packing failed businesses peaked in print between 2008-2010, during which time PrintWeek had an almost weekly round-up of the latest administrations.

Since then, the number of pre-pack admin sales has declined in the print industry, although the sale of Holdmede (trading as Pelican Press) earlier this month to Eastland Colour – a company set up by a number of Pelican Press employees – proved that the strength of feeling these sales inspire has far from diminished. As during the height of print’s pre-pack boom, much of the anger from print bosses was directed at suppliers, with several printers stating openly on printweek.com that they would cancel their account with any paper supplier that traded with Eastland Colour.

Paper companies obviously do not want to be hit by bad debt, but printers accuse them of continuing to trade with pre-pack businesses as a way of recouping some of the debt taken on when the company collapses in the first place.

When looking at the figures, it is understandable that they would want to regain some of the lost earnings. According to NAPM statistics, between 2003-2011 UK paper merchants lost almost £113m because of bad debts with printers.

However, as NAPM chief executive Tim Bowler says (see Opinion), another statistic that the paper companies have found is that four out of every five pre-packs will be hit by insolvency again. So they are well aware of the risk involved in supplying these companies.

As Bowler specifies, the NAPM advises all of its members to implement a policy on pre-pack administrations, although he says the body can’t impose a policy on its members.

One firm that is clear on its policy is Elliott Baxter (EBB), which has a policy statement for dealing with "phoenix" and pre-pack companies on its website. Quite simply, it will not knowingly deal with these companies for credit or for cash.

EBB financial controller David Mullet says the company, along with other paper suppliers, began looking at pre-pack policy around 2006/07.

"We actually made the move to place an anti-phoenix policy on the website and it is there for all to see," he explains. "We have religiously tried to stick to that policy; we don’t support companies that are born out of the closure of a printer with the same leadership as before, even for cash. I was asked this week if I would continue to supply a CVA, I said no."

While Mullet believes that Pelican will be supplied paper by somebody, he adds that the company may be doing it without knowing: "I’m sure other paper suppliers are still supplying phoenix companies and it’s frustrating. People find ways around checks, so a company may be supplying somebody against their policy without even knowing it. Another printer could be ordering paper for them. Monitoring will only go so far."

But Antalis McNaughton regional credit manager for UK and Ireland Steve Parkins says a paper firm is obligated to customers, regardless of where they want paper delivered.

He adds: "This is a difficult area to police. There is an issue of third party ordering and sometimes they will ask us to deliver to a third party address.

"There isn’t much we can do. We have a policy of dealing with the principal and the principal is the firm that receives the invoice. It’s up to them to choose where the paper is delivered."

While paper manufacturers take the bulk of the hit when it comes to bad debt, printers often point to insurance protecting suppliers, making them more than happy to supply despite the risk. One printer says: "I question salesmen about this and they tell me they only care about the sale. They are protected by insurance, so they don’t have to worry."

However, Parkins refutes this. For a start, Antalis now has three full-time credit experts. Parkins says: "They go out with the salesmen; they get face-to-face with customers and can make a real decision on them.

"The insurance is simply a safety net. If it looks like a risk, we won’t take it, regardless of what the insurance is like. We send a clear message to our salesmen; insurance does not mean an account is protected."

While figures have fluctuated, it appears that paper debt is being brought under control and Parkins says: "We monitor failures, so we can demonstrate that all the actions we have taken to either trade out of a contract or reject a contract have been pro-active in avoiding debt."

EBB’s Mullet adds: "We feel we have caused printers to rethink their actions – although whether printers or the insolvency practitioners who deal with them are making the decision, who knows."

Whether it is having an effect or not, printers want transparency in dealings, so Parkins adds a refreshing note when he says he is happy to be questioned on his company’s activities: "If there is somebody a printer thinks we shouldn’t be dealing with, we’re happy to challenged about it."

– Read NAPM director Tim Bowler's comment here