Pre-packs involve the pre-arranged sale of struggling firms before formal insolvency procedures have begun. The Department for Business, Innovation and Skills has launched a consultation to determine "whether to strengthen the regulatory regime surrounding the use of pre-packs".
In the consultation's foreword, the minister for business and regulatory reform Ian Lucas claims that "pre-packs can often deliver the best results for creditors". But Lucas adds that "confidence in the system is being damaged".
"I therefore want to invite views on whether new measures are needed to strengthen transparency and confidence," he writes.
The consultation's launch follows the release of data from the Insolvency Service claiming more than a third of pre-pack disclosure statements filed by practitioners are not properly compliant with rules and regulations.
R3 has now accused the Service of being "misleading" and claimed that just seven per cent of reports "were considered suitable for potential disciplinary action".
The trade body's president Peter Sargent said: “While we welcome any consultation that looks at pre-packs we question the justification used to introduce it. The perception that pre-pack rules need ‘strengthening’ derives largely from the Insolvency Service’s own misreporting on pre-packs."
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