Summary
The current level of concern around insolvency numbers is perhaps not surprising because of the greater number of pre-pack appointments. The pre-pack process has become prevalent since the Enterprise Act 2002 introduced changes in the purposes for administration and the method of appointment of an Administrator with effect from Sep 15, 2003. To understand the concerns over pre-pack appointments it is necessary to examine the statutory purpose of administration (Schedule B1 3(1)(a) of the Insolvency Act 1986) which states that the objective of an administration is rescuing the company as a going concern. The pre-pack process therefore ignores this objective, as the company has not been rescued as a going concern. The Administrator accepts the appointment knowing that the prime objective is not to be achieved and relies on the sub purpose of achieving a better result for the company's creditors as a whole than would be likely if the company were wound up.
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Extract
The Trouble with Pre-Packs
The current level of concern around insolvency numbers is perhaps not surprising because of the greater number of pre-pack appointments, but does that necessarily mean that the process is increasingly subject to abuse? Statistics alone will not give the answer. To make a judgment it is necessary to examine the procedure as well as the...
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