Pre-packs good for troubled businesses
Pre-packs can be a constructive insolvency process, but they should not be used as a sticking plaster that delays an inevitable collapse.
This is the conclusion of a recent article in The Scotsman, which merits reading as a clear exposition of the issues.
Fundamental to the continuation of any distressed business is the change required to ensure that its misfortune does not recur.
Insolvency procedures are invoked, ideally, at a time and in a way that value can be preserved (if not created). Whether the right solution is a pre-pack will depend on the circumstances, but the earlier IPs are involved in a troubled business, the better chance we have to preserve value – avoiding formal insolvency if possible, but using it constructively if necessary.
Date: 29th September, 2014
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