THE GOVERNMENT has announced new scrutiny measures for businesses going into administration.
A new law will require pre-pack administration sales to be independently scrutinised.
Pre-pack administrations are arrangements to sell a company’s business or assets before it enters into administration.
Soon, mandatory independent scrutiny of these arrangements will be required when connected parties, for example the insolvent company’s existing directors or shareholders, are involved in the purchase.
And the move has been praised by R3, the UK’s insolvency and restructuring trade body.
Garry Lee, chair of R3’s South and Thames Valley region said: “We welcome efforts to enhance confidence and transparency in pre-packs, but these efforts should be balanced against protecting the valuable role pre-packs play.
“[They] are an important rescue tool as they are often the best way of preserving a business and maximising returns to its creditors.
“These reforms, while not perfect, should help to improve confidence in this important business rescue tool.”
The Government will introduce regulations into Parliament in due course.
For more information, visit: www.r3.org.uk