R&I Soundbites: Pre-Pack Reform
As from 30 April, recent legislative reforms mean that an administrator must not make a substantial disposal to connected persons within the first 8 weeks of an administration, unless either the company’s creditors have approved the transaction or, more likely, the buyer has obtained a qualifying report from an evaluator. While not aimed solely at pre-packs, it’s clear that concerns around their transparency in particular were the driving force behind these changes. The mood music around pre-packs is clear and the insolvency industry as a whole will need to get behind these changes to make them work and ensure that a valuable business rescue tool remains part of the toolkit.
In this podcast, we consider the scope of the new rules. We discuss the types of transactions that might be caught and whether they could apply in loan-to-own structures. We take a look at the role of the evaluator and the issues in ensuring their report stands up to scrutiny. We also give some thought as to what potential impact the reforms might have in practice for the drafting of sale agreements, particularly around the protections afforded to administrators.