In the presence of a financial meltdown and insolvency, entrepreneurs need to make quick and smart decisions to solve the problem or at least minimize the losses that come attacking. One of the most sought after solutions today is the pre pack administration. But what is it about and what advantages does it bring? Our friends from AABRS have shared us some pointers below.
A pre pack administration is a legal and effective method of selling a business and its assets, in part or as a whole, to a trade buyer a third party or to the existing directors where it shall operate under a new company. In some cases, an agreement between seller and buyer may include a stipulation for a buy-back.
Benefits and advantages of a pre pack administration include the following:
- Restart and Reboot: Instead of liquidating and bowing out in defeat, a pre pack offers companies another shot at it. Consider this as a restart or reboot button. This process enables organizations to further lengthen and strengthen their going concern, pick up the pieces, figure out what went wrong, put it back where they should be and improve from there.
- Branding and Image: When insolvency and financial crisis looms, the best thing that any entity can do is to choose the lesser evil. In other words, opt for the alternative that although may not be pristine and perfect, deals you a better card. To investors, the business industry and the general public, pre packs are like restructuring and improving while liquidations are a complete surrender.
- Creditor Interest: When it comes to their interests, creditors will see to it that they are never at a disadvantage. Liquidation puts them in that scenario and they would more often than not opt for a better solution. Pre pack administration helps them get a better return among any other option.
- Jobs and Employment: The method also helps secure more jobs. Without having to close the business, people will get to keep their sources of income. We all know how finding one can be hard so it becomes a huge relief if employment is saved.
- Economy: A business closing down, whether voluntarily done or forced by court and law, hurts the economy. It stings badly and it would be best to avoid it. Opting for a pre pack helps prevent that from happening.