A guide, not advice. This explains how things generally work. A licensed insolvency practitioner will tell you what applies to your company or to you.
Pre-Pack vs Standard Administration
Both pre-pack administration and standard administration are forms of the same legal procedure, but they differ in when the sale is agreed and how quickly it completes. Understanding the difference helps directors understand what to expect.
The Key Difference
- Standard administration - the administrator is appointed, takes control, markets the business, and seeks a buyer after appointment. The sale completes during the administration.
- Pre-pack administration - the sale of the business and assets is negotiated and agreed before the administrator is appointed, completing immediately on appointment.
Why a Pre-Pack Is Faster
A pre-pack completes immediately on appointment, which:
- Preserves value - the business is sold as a going concern before customers, staff, and contracts drift away
- Saves jobs - employees often transfer to the buyer under TUPE
- Avoids the erosion of value that occurs during a prolonged administration
The trade-off is that creditors have no say in the sale before it completes - which is why pre-packs are subject to safeguards (SIP 16 disclosure and the Pre-Pack Pool for connected-party sales).
Why a Standard Administration Is More Transparent
A standard administration markets the business openly after appointment, giving all potential buyers a chance to bid. This can be more transparent and may achieve a higher price, but it takes longer - during which value may be lost.
When Each Is Used
Pre-Pack
- A buyer is already identified (sometimes the existing directors)
- Speed is critical to preserve value
- Delay would lose customers, staff, or contracts
- Selling as a going concern returns more than a piecemeal sale
Standard Administration
- No buyer is identified
- Time is available to market the business
- Open marketing may achieve a higher price
- Creditors want transparency
Both Lead to the Same Process
In both cases, the administrator is appointed under the same legal procedure, owes the same duties to creditors, and reports to them. Where rescue fails, the company may move into liquidation after the sale.
Speak to a Licensed IP
Our Manchester-based practitioners will advise honestly on whether a pre-pack, a standard administration, or another route is right for your business.