Transcript for What is a Pre-Pack or MBO Administration
Video Transcript
I am often asked about a pre-pack administration or management buy-out from an administrator; let me explain a little about what that involves.
If the administration application is a so called “pre-pack”, or an “MBO”, the company’s assets will, in most cases, be immediately sold back to the directors/shareholders, in accordance with contracts drafted prior to filing for administration, and duly signed shortly after the Administrator views the court stamped application form.
Technically it is possible, indeed increasingly common, to place an insolvent company into administration, buy the assets back from the administrator on day one, then the administrator sends out his proposals to creditors which are, that the assets have been sold already, therefore there is nothing further to be done. The asset realisations cover the costs of administration, then the administrator can waive the requirement for a creditors meeting, unless creditors demand one, which is unusual. In the absence of any objections, the proposals are deemed to be accepted. If there are insufficient funds available for a dividend to be paid to creditors, as is common for small companies, the administrator can proceed to have the company dissolved directly by way of a striking off without the need to place the company into liquidation if he considers this to be appropriate.
Of course, in a pre-pack administration, the administrator must be able to justify the deal on the grounds that a better realisation was achieved than would have been the case if the company had gone into liquidation, or if the administrator had traded the company with a view to achieving a higher sale price by selling the company as a going concern.
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