What is pre-pack administration and how does it work?

Pre-pack administration is a specific form of administration where the sale of a company’s business and assets is arranged before the administrator is formally appointed. As soon as the administrator takes control, the pre-agreed sale is executed, allowing the business to transfer quickly to a new owner, often a new company formed by the existing directors. The main advantage of a pre-pack is speed. By completing the sale immediately, the business can avoid the loss of value, customer confidence, and staff morale that often occurs during drawn-out insolvency procedures. Creditors may initially view pre-packs with suspicion, as assets are sometimes sold to connected parties, but strict rules require administrators to demonstrate that the sale achieves the best possible outcome for creditors compared to alternatives. Independent valuations and transparency reports must support the deal. Pre-packs are frequently used in retail and hospitality sectors to protect jobs and preserve brand value while reducing liabilities that made the old company unsustainable.