As of the 1 January 2009 there was a change in the Insolvency Regulations which were aimed to reduce the ability of 'some' practitioners to rush through contentious sales of businesses in administration.
The new statement in England and Wales makes it obligatory that administrators disclose detailed and accurate information to creditors before and after a pre-packaged administration.
The best practice code establishes a number of ways that the administrators should conduct themselves during a the whole process of a pre-pack sale.
The code says - "Practitioners should be clear about the nature and extent of their role and their relationship with the directors in the pre-appointment period. They should make it clear that their role is to advise the company and not to advise the directors on their personal position." For this reason we always advice our client to never appoint a Insolvency Practitioner direct but rather employee us on a consultancy basis to ensure that the directors personal position is fully protected.
The statement continues by saying that "Practitioners should bear in mind the duties and obligations which are owed to creditors in the pre-appointment period. They should be mindful of the potential liability which may attach to any person who is party to a decision that causes a company to incur credit and who knows that there is no good reason to believe it will be repaid". It is in our opinion that our clients should always seek independent advice prior to entering into any discussions with Insolvency Practioner to ensure that they receive expert advice which is aimed at mitigating their liabilities opposed to receiving advice on how o best serve their creditors.
As of the 1st January 2009 and in relation to all cases of a pre-packaged sale, the administrator will have to disclose the following information to creditors;
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