Pre-pack administration
Can the directors set up a new limited company?
It is possible for directors to set up a new limited company and arrange for the new company to continue to trade the business of the company which is placed into liquidation.
It is very important that this is done with the guidance and advice of an Insolvency Practitioner who will have to agree to the transfer and its value before the company is placed into CVL. This will ensure that you are protected from claims against you in the future.
This process is known as a pre-pack liquidation or a pre-pack Administration.
In a pre-pack liquidation the directors will buy some or all of the assets and the business of the company which is being placed into CVL or Administration. Employees may be employed by the new company and preserve their employment rights e.g. length of service entitlements. The business of the company can continue uninterrupted.
To find out more about pre-pack liquidations and pre-pack Administrations and how your company’s business could be saved call now and talk in confidence to a member of our team. We will give you straightforward confidential advice and help you make the decisions which are right for you.
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The company had pre-existing maintenance contracts that were worth preserving but which would give rise to claims against the company if there were not continued. A sale of the business to a connected party appeared sensible as their company were prepared to offer consideration for the assets including the contracts and this would avoid claims. A senior representative of the purchasing company also provided assistance to the Administrator in collecting book debts due to the insolvent company. Employees’ contracts of employment were also transferred over to the purchasing company, which provided continuity for staff, and reduced claims in the Administration. Once all matters within the administration were dealt with, the company entered voluntary liquidation to allow the Liquidator to collect remaining book debts due to the company, and facilitate a dividend return to the unsecured creditors of the company. This return was estimated to be higher than if the company had been wound up (liquidated), without first entering into administration.