PPF warning on pre-packaged administrations

The PPF has issued guidance on the approach it will adopt in relation to pre-packaged administrations (“pre-packs”) where the same insolvency practitioner (“IP”) intends to continue as the office holder in the subsequent liquidation or company voluntary arrangement.

IPs will need to be aware of the PPF’s guidance, as they are at risk of being replaced following a pre-pack if it is not followed.

The PPF’s guidance can be accessed here.

The PPF is concerned that pre-packs are being presented to it as a “given”, with meaningful consultation with the pension trustees and the PPF not taking place at an early stage. The PPF is also concerned at the lack of effective scrutiny of the directors’ and administrator’s actions in a pre-pack scenario, especially when no new IP is appointed after the pre-pack to independently review the actions of the directors and the administrator.

The PPF’s guidance sets out its approach when presented with administrators’ proposals following a pre-pack. The PPF has made it clear that it will resolve to appoint an alternative IP to act as CVA supervisor or liquidator if it has concerns about the process. In order to minimise the risk of being replaced following a pre-pack, we have drawn out the following practical points for IPs:

• Ensure that the trustees and the PPF are consulted prior to the appointment of the administrator.
• Take into account the views of the PPF and the trustees as part of the process, including in relation to costs.
• Consider whether the business should be marketed prior to a pre-pack and, if so, what method should be used for marketing.

Contacts

If you would like further advice on anything covered in this update, please contact Jonathan Hazlett, Claire Bundy or James Saddler whose contact details are below.

Osborne Clarke is a member of the PPF’s Assessment Period Legal Panel and the Insolvency & Corporate Panel.