Restructuring & Insolvency in Europe – Pre-packs

Pre-packs are a contentious rescue tool in the UK and the Netherlands due to the inherent conflict between the transparency sought by many stakeholders and the loss of value triggered by the opening of a formal insolvency procedure.

There is also conflict between the officeholder’s duty to act in the best interests of creditors and the perspective of competitors, commentators and economists, who see a distressed business being able to continue shorn of a creditor burden. This is said to amount to unfair competition and, if the business fails again, inefficient use of resources.

Pre-packs have recently been introduced in France but the objective there is continuity of employment – which contrasts with a Netherlands pre-pack where the Acquired Rights Directive (TUPE) does not apply.

In the USA pre-packs are seen as a cost-saving approach to Chapter 11 proceedings but, being court driven, as are all US insolvency proceedings, they are not cheap.

Discussion of such comparative approaches in different jurisdictions helps us to gain insight into principles we apply in domestic restructuring and insolvency situations as well as to know how and with whom to address complex cross-border cases.