I just read an article on Gifts and Greetings Review that explains in more detail the deal I read about Clintons cards in a newspaper headline yesterday.

The deal hinges on something that is known as Pre pack administration. It is an insolvency procedure where a company arranges a deal to sell its assets to a buyer before appointing administrators as a way of selling the business on to a third party.

It can also be used to sell the business to the existing directors operating through a new company. The new company needs to be able to demonstrate it is viable and has the funding for the purchase in place so it can buy at a fair value.

The question is, what is a fair value for an ailing company? If the directors who are waiting in the wings don’t buy, how much can the administrators (who are not yet appointed) expect to get for the company? There may not even be another buyer on the horizon.

Who Loses?

I don’t know who loses or whether anyone loses. Do suppliers, landlords, HMRC, and others, lose out more than they would if a petition to wind up the company was presented?

Posted by:David Bennett

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