The RHA has welcomed the government’s decision to investigate the pre-pack administration process after the Insolvency Service announced a review that aims to make the procedure more transparent for creditors.

RHA chief executive Geoff Dunning told MT the review needs to look into balancing the needs of both creditors and the company.

The association is also encouraging traffic commissioners to look more closely at trading history before granting an O-licence to a firm that has emerged from the process.

Dunning said: “We hope the government will take firmer action, and we want a more thorough process so that creditors get a fairer deal.”

The review is expected to begin in late spring, once the Insolvency Service has strengthened the standards that set out the quality of information insolvency practitioners are required to give creditors.

It is also revising the standards involving the sale of assets to connected parties and will monitor outcomes to assess whether the process has been abused.

Business minister Lord Younger told ministers last week: “Insolvency practitioners will have to confirm that a pre-pack is in the best interests of creditors. That should provide greater confidence that the pre-pack sale is justified.”

While legal, the RHA believes that some firms that have written off debts through a pre-pack deal are competing unfairly with members that haven’t. It recently announced a policy shift where any operators making use of these procedures are ejected from membership (with the right to reapply after review).

Time for change

MD of Maritime Transport John Williams said there is no need for the law to provide measures that prop up “unsuccessful companies” and that he would be writing to his local MP, as well as the Office of Fair Trading, to highlight his concerns.

He said: “It’s bad practice; the market isn’t allowed to function properly.”

An Insolvency Service statement said: “Used appropriately, pre-packs can be a highly effective process to ensure the best deal for creditors by better enabling the rescue of businesses, preserving value, and safeguarding jobs.”

  • Do you think the legislation that allows pre-pack sales of failed firms to the existing management should be rewritten? Tell us what you think in this month’s Trucking Britain survey.