What is a pre-pack?

Pre-pack is the term used to describe an arrangement whereby the sale of all or part of a company’s business and/or assets is negotiated and agreed before an insolvency practitioner (IP) is appointed, with the relevant documentation being signed and implemented immediately or shortly after the appointment is made.

Following the demise of receiverships, administration is the insolvency process most commonly used to achieve a pre-pack sale.

Why are pre-packs used?

If you thought the popularity of CVA's had been overshadowed by restructuring plans you might have to think again and watch what happens in the coming months. As you will know from the press there are a number of high-profile retail CVA's which are being challenged by landlords – New Look and Regis to name just two.

The recent Accountant in Bankruptcy v Peter A Davies case examines how a family home is dealt with following sequestration of an individual. The sheriff's comments about the case suggest there could be room for improvement in the Bankruptcy (Scotland) Act 1985, to make the process clearer for everyone involved.

Case background

The automatic stay provided under section 362 of the Bankruptcy Code is an injunction, arising when a bankruptcy case is filed, which prevents all proceedings or actions against the debtor or the property of the estate without court permission - the so-called “lifting of the stay”.[1]

Last year, temporary changes to the bankruptcy process were brought in by the Scottish Government, to help individuals financially impacted by the pandemic. Scottish ministers have now introduced the Bankruptcy (Miscellaneous amendments) (Scotland) Regulations 2021, to make some of those changes permanent.

The main purpose of these measures is to improve access to minimal asset process bankruptcy ( "MAP" a form of bankruptcy typically aimed at people with low income and few assets) and to reduce the cost for debtors seeking bankruptcy more widely.

In American jurisprudence, resolution of disputes often involves the use of important tools to obtain information necessary to achieving a client’s goals. These tools are collectively known as “discovery.” Discovery is most often used in litigation; however, it may also be used as part of the bankruptcy process, without the need for a pending lawsuit.

On 26 March 2021, amendment to the Corporate Insolvency and Governance Act 2020 (Coronavirus) (Suspension of Liability for Wrongful Trading and Extension of the Relevant Period) Regulations 2020 (the Regulations) will come into force.

The purpose of the Regulations is to extend some of the temporary measures introduced by The Corporate Insolvency & Governance Act 2020 (CIGA), to assist companies that are struggling to deal with the ongoing economic ramifications of pandemic-related restrictions.

These Regulations apply across the UK, including Scotland.

The majority of the building and engineering contracts that we encounter (and draft) require some form of performance security from the contractor, whether this is a parent company performance guarantee granted by the contractor's ultimate holding company, or a performance bond granted by a third party surety or a bank for a capped sum. Indeed most, if not all, standard form contracts provide for these forms of security, even if only as an option.

The imperative “justice, justice shall you pursue” is nowhere better illustrated than in the application of deadlines to perform an act, including filing dates, limitations dates, due dates for filing appeals, and deadlines for filing claims. Courts sometimes exercise their equitable jurisdiction rather than follow the literal language of rules of procedure.

When a debtor files bankruptcy, bankruptcy attorneys and creditors are well aware of the importance of assessing the need for creditors to file proofs of claim and making sure that proofs of claim are timely filed.