The Pre Pack Pool Makes Waves - Again

In the House of Lords debate on 17 June regarding the Corporate Insolvency and Governance Bill, amendment 57 was tabled for discussion and supported by several members of the House.

 As we all know, the deadline passed for making the pre pack pool compulsory some weeks ago, however amendment 57 to the Bill tried to do just that. Citing Teresa Graham’s report from 2014, many arguments were made in favour of the amendment, with such sweeping statements as “pre-packs are everywhere at the moment” “they are an unchecked process” “permitting current owners to cherry-pick parts of the business to dispose of” and “heads I win, tails you lose”.

I am sure I am not the only one who feels anger at comments like this. We are a heavily regulated industry, we are qualified and licensed, pre packs are more heavily regulated than any other procedure we do, with our SIP 16 reports being sent directly to our regulators for checking.

I am sure I do not have to tell you readers that we do not use this process to allow directors to side step debt and carry on the next day, we use this where the situation calls for it. Where there is no funding, so we cannot trade, where there is a decent core business, the sale of which would save jobs, where the directors have not fundamentally done anything wrong, merely lost contracts, been at the wrong end of Brexit, been stuck in expensive leases and now the government thinks that pre packs will be rife and Covid will be used as an excuse to write of billions. It saddens me that the insolvency industry is going to be one of the industries at the forefront of ensuring a swift economic recovery and yet we are being looked at as the dirty part of the financial services industry, not only by the press, but the law makers too.

Thankfully, there is a positive end to this story. The Parliamentary Under-Secretary of State for BEIS, Lord Callanan  stated the full legal requirements an administrator has and the reporting obligations under SIP 16 and further stated that DBEIS are working with the industry stakeholders to discuss options for strengthening professional regulatory requirements in this area, but currently could not agree to Amendment 57.