Pre-pack sales of troubled businesses to face 'mandatory independent scrutiny' - Government

Pre-pack administration sales involving people already connected to the businesses will soon be subject to mandatory scrutiny, as part of new laws.

A pre-pack deal sees all or part of a business sold before it enters administration, with the aim to keep it trading and protect jobs.

However the government said that "concerns have been raised that arrangements may not always be in the best interests of creditors".

Minister for corporate responsibility Lord Callanan said: "Pre-pack sales play an important role in rescuing viable businesses, while protecting jobs and supporting our economy.

"As we continue to tackle Covid-19, it is more important now than ever that people have confidence in the insolvency process.

"This new law will ensure all sales to connected parties are properly scrutinized - protecting the interests of creditors and the general public, as well as the distressed company."

The government added that further details on how the independent scrutiny will be enforced will be released "in due course", but will focus on deals involving parties already connected to the business - such as existing directors and shareholders.

Recent examples of pre-pack sales in the channel include Feltech and Centralis and Steljes, while deals for the likes of Misco were on the table but ultimately fell through.