The government is planning to publish annual reports on the extent of the use of pre-pack administrations to try and monitor the number of companies resorting to using the measure.
Among the details of the Budget Report was a mention that the The Insolvency Service is going to give a six month update on pre-packs this June in response to some concerns the practice was increasing.
“To prevent creditors from being treated unfairly through abuse of pre-pack sales, the Insolvency Service will also publish a report in June 2009 on the operation of the first six months of the regime monitoring pre-pack sales and will then publish further follow-up reports on an annual basis,” stated the Budget Report.
According to The Telegraph there are already forecasts that there are around 100 pre-packs per month and some creditors are worried that administrators are encouraging quick sales that leave those customers and employees hoping for a settlement with nothing.
The channel has suffered its fair share of pre-pack administrations over the years but expectations have increased that as a result of legislation that makes it easier to fold a company and the recession will fuel more activity.
Eddie Pacey, European director of credit services at BellMicro, said that there were concerns that the Insolvency Act had made it too easy for directors and business owners to enter into a pre-pack to side step paying creditors.
“There will be greater emphasis on principal suppliers approached by the new companies [formed through a pre-pack] to settle their debt in some way before they start trading,” he said.