Articles
Clampdown on pre-packs
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Release Date:
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10 January 2009
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Author:
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Samantha McClary
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Original Publication:
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Estates Gazette
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New rules to stop abuse of pre-pack administrations were published this month.
The guidance demands that administrators disclose information about why a pre-pack deal was conducted, the price paid for the new business and any links between the collapsed company and its new management.
Government body the Insolvency Service said the new rules were needed because of the increasing number of pre-pack administrations. It expects to see at least 100 a month this year.
Sir Tom Hunter's West Coast Capital recently bought 43 of his fashion chain USC's 58 stores out of administration in a pre-pack deal, while tea and coffee retailer Whittard of Chelsea and menswear chain The Officers Club were rescued in the same way.
Pre-packs often result in landlords being left with hard-to-let properties, while the assets they would want back remain occupied by the rescued business.
One landlord said that he did not expect the new rules to reduce this practice of businesses being able to get rid of troublesome leases.
Property lawyer Daniel Levy, a partner at Mishcon de Reya, said that greater transparency would benefit landlords but added: "Until the rules have real teeth for those who abuse them, pre-packs will still be a temptation for those looking to wriggle out of unwanted leases."