Executive sector news

Calls for overhaul of pre-pack administrations

4/8/2009
Amid expectations of a surge in insolvencies, the Government is under fire to overhaul the rules covering pre-pack administrations – the controversial bankruptcy procedure.

Shaun Purrington, a director at credit insurer Atradius, said further steps to protect unsecured creditors in pre-packs were urgently needed. "We anticipate a further wave of insolvencies in the run-up to Christmas and although pre-packs were designed to protect businesses, the converse is true, as they allow existing creditors to be sacrificed," he told 'The Telegraph'.

The Association of British Insurers (ABI) is also calling for changes, including moves to end to it says are continuing abuses of the bankruptcy system. When a business goes into administration it says a level playing field is needed for all sides.

Among its proposals, the ABI wants the Government's Insolvency Service to publish an overview of the duties of advisers who are acting for businesses that enter pre-pack administrations. It proposes a ban on the same firms acting as advisers to a distressed company and immediately thereafter as administrators. It also says that they should have to declare when they were first approached and when the pre-pack decision was made.