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