Pre-packs – a possible solution for companies in financial difficulties by Louise Engel, Corporate department

A short while ago the legal world was rocked when news about the serious financial problems at a leading law firm – Halliwells – was widely reported in the media. There had been suggestions that a pre-pack solution would be sought. This is where the business is sold without publicity to avoid a negative reaction from customers and staff and/or where there is a lack of funds to find a more sophisticated rescue option. As it happens, numerous law firms stepped in to acquire the different elements of the Halliwells’ business.

Pre-pack arrangements sometimes receive a bad press, with some seeing the creditors’ losses as unfair and others confusing them with the old practice of “phoenix” companies. Yet research from the professional insolvency body – R3 – indicates that in 2009, 90% of the jobs in pre-pack sales were preserved.

The advantages and disadvantages of pre-packs and the issues for directors are explored further in a new Royds bulletin – please email info@royds.com if you would like a copy.