English Pre-Packaged Corporate Rescue Procedures: Is there a Case for Propping Industry Self-Regulation and Industry-Led Measures such as the Pre-Pack Pool?

This work analyses the key issues raised by pre-packaged administration procedures (‘pre-packs’) in England and Wales, and the ability of the Pre-Pack Pool (‘the Pool’), an industry-led body of experts introduced after the Graham Review into pre-packs, to deal with these risks by giving opinions on the purchase of a business and/or its assets by connected parties in pre-packaged sales. This paper adopts a normative approach to investigate if regulatory reforms are needed to support the activity of industry-led bodies such as the Pool to deal with pre-packaged sales of distressed yet viable corporations. This paper argues that the key issue raised by pre-packs is their abusive use. Abusive filings are determined by a close group of players who collusively act solely to sidestep or subvert other insolvency rules and extract value from and/or reduce liability towards the company, with the effect of causing “undue financial harm” to the creditors. This paper demonstrates the potential of the Pool to avoid abusive filings. Nevertheless, the government needs to properly and actively support this industry-led body of professionals to ensure that the Pool’s promising results in the case mentioned above are carried out over a wider spectrum of circumstances. As a result, this paper advocates that the government should put its weight behind expanding the powers and duties of the Pool, making referral to the Pool compulsory in any pre-pack sale, ensure adequate supervision over its decisions and not legislate to either ban pre-pack sales or abolish the Pool.