The whole issue of pre pack administration is drawn from the intention of the company's top management to save the company from collapse. The company can be struggling with company debts and manage to rise on its feet and start moving for a second time if the procedure of pre pack can be undertaken accordingly. This is where the business directors opt to form yet another company as a fresh separate entity. The old company transfers all its useful assets to the new company as a way of disposing them. When this process is finished, the directors file the notice of dissolution. Through this way, the company is wound up.
Generally there are several factors why the alternative of pre pack is used. These contains the very fact that the company is strained by business bills that it cannot meet. In this case, the business is confronted with severe threat of falling apart. This is actually a way of providing the business the new start and the new face in terms of liquidity. All the assets are paid for by the new company while the liability continues to be with the old company. This provides the new company the strength to operate in the market without trouble from earlier creditors.
Pre pack administration can be conducted if the directors can prove the following conditions. The company must possibly be under threat of being wound up by way of notice, the bailiff must have issued the notice of auctioning the properties of the company in question due to enormous debts, the landlord of the premise must released the forewarning of interrupting the business due to unpaid bills, the three quarter vast majority of the shareholder must have consented on liquidation, appointment of an administrator by the debenture holder as well as the company have to be time barred. These conditions must be fulfilled to facilitate the administration of pre pack process.
Pre packing in an adiminstration is the actual procedure which needs to be carried out in sequential manner. When the company meets the above conditions and directors are convinced that this is the only solution, they may start by forming the new entity. The administrator is appointed right after the new limited company is completely registered. The process of disposing the resources of the previous company to the brand new entity will start. The administrator then calls for the conference of all creditors to inform them regarding the removal. The administrator discusses the plan of winding up the company and proceeds of transaction are shared between them.
The rule requires that the directors of the old company to cover all taxes to the customs authority in order to become the directors of the new company. Also, the administrator has to be certified and licensed bankruptcy practitioner. The transfer of resources from the previous company to the new one will be accomplished through legal sales agreements which are drawn simply by the administrator. The liquidation of the old company takes effect upon the consent of the creditors.
Pre pack administration has a number of merits. The business is capable to keep their workforce, suppliers and clients. This makes the company to be able to support itself inside the market. This is far much better even to the country's economy compared to the business falling apart and workers losing their job.
