The term “pre-pack”, as it relates to insolvency sales, can have different meanings in different jurisdictions. In essence it refers to a sale of a distressed company or asset where the purchaser or investor has been identified and the terms of the sale have been fully negotiated before an insolvency process occurs. The advantage to the “pre-pack” structure is that the sale can be completed immediately upon or closely after the appointment of the insolvency office holder and, critically, without material interruption to the trading activity of the target company or asset.

The Central Bank of Ireland (the “Central Bank”) has declared its intention to strengthen the protection of client assets and has now published its “Review of the Regulatory Regime for the Safeguarding of Client Assets” (the “Review”).

The Review identifies three main objectives which should form the basis of a client asset protection regime:

The usage of pre-pack insolvency sales is less developed in Ireland than in other jurisdictions, but there has been an increasing number of asset sales structured through pre-pack receiverships over the last year. The most recent successful example was the sale of the A-Wear retail chain by its receiver Jim Luby of McStay Luby. In July 2011 the Superquinn grocery chain was sold to Musgraves by its receivers Kieran Wallace and Eamonn Richardson of KPMG, in what was probably the largest ever pre-pack transaction in this market. 

Once a company has entered into a formal insolvency process, all its assets must be realised and distributed in accordance with the Companies Acts. An attempt to prefer a particular creditor up to two years prior to an insolvent liquidation can be declared void by the courts on the application of the liquidator of the insolvent company. To succeed on such an application, however, the liquidator must prove that the dominant intention of the insolvent company at the time it entered into the transaction was to prefer the creditor in question.