Richard Fleming, UK Head of Restructuring at KPMG, today welcomed the statement from Ed Davey, the Minister for the Department of Business, Innovation and Skills (BIS), on proposed ‘pre-pack’ administration reform:

“In the last month alone, we have used the pre-pack administration tool to rescue three well known retailers: Blacks, Bonmarché and La Senza.  Without the pre-pack mechanism, it is likely that more stores would have had to close and more staff would have lost their jobs.  Importantly, the use of a pre-pack, rather than selling the businesses out of a trading administration, minimised the disruption to operations.  At a time when many more businesses face collapse, today’s statement from the minister is an important acknowledgement of the role pre-packs have to play in the country’s corporate recovery.  At the same time, the statement has focussed on the importance of tackling so-called ‘phoenix’ pre-packs, where the mechanism is abused by unscrupulous directors to escape mounting debt liabilities. 

“While phoenix pre-packs are most prevalent amongst small businesses, abuse of the system tarnishes the name of legitimate pre-packs which should be viewed positively by both the business community and the many stakeholders who rely on its health. 

“We are particularly pleased that the efficacy of the Statement of Insolvency Practice (SIP) 16 report, which articulates the rationale of the administrator in selling the business via pre-pack, has also been acknowledged.  We will support efforts to improve its adoption across the insolvency practitioner community, which should go some way to bolstering confidence in, what we believe, is a world class system.”