Pre-pack administration
What a pre-pack involves
A pre-pack administration generally involves negotiating a business or asset sale before an administrator is appointed, with the sale completed shortly afterwards. It is a formal insolvency transaction, not a shortcut for moving assets without scrutiny.
The administrator must consider the applicable duties and creditor outcome. The business may transfer while the original company’s affairs still need to be dealt with.
Valuation, funding and buyer identity
A proposed buyer must have credible funding. Valuation, marketing, alternatives and the reasons for the sale require careful consideration. If directors or other connected parties are involved, that connection must be disclosed.
Additional requirements can apply to substantial disposals to connected persons. Specialist advice is needed on the current rules, approvals or evaluator requirements and the transaction structure.
Consider the practical consequences
A sale can affect contracts, employees, property, finance and licences. Do not assume all arrangements transfer automatically or that the buyer can use the same trading name without checking restrictions.
Bring details of assets, secured lending, proposed consideration and the buyer’s funding. Compare the proposal with other outcomes rather than assuming a pre-pack is necessarily available or preferable.
How is a pre-pack sale prepared?
Preparation involves understanding the business, ownership of assets, secured lending, valuations, potential buyers and the alternatives to a sale. The buyer needs evidence of the purchase funds and enough working capital to operate afterwards. A purchase price alone does not show that the transferred business is viable.
Discuss customer contracts, premises, intellectual property, licences and essential suppliers early. Some arrangements require consent or replacement agreements. The administrator must exercise independent judgement; directors cannot instruct them simply to accept a preferred buyer’s offer.
What are the connected-party rules?
A substantial disposal to a connected person within the first eight weeks of administration is subject to specific restrictions. The administrator must obtain creditor approval or receive and consider a qualifying evaluator’s report obtained by the connected person before proceeding under that route.
The report is independent scrutiny of the proposed disposal, not a guarantee that the administrator will complete it. Buyer identity, connections and previous reports must be disclosed. Specialist advice should establish whether a proposed transaction falls within these rules.
What happens to employees and existing liabilities?
Employment transfer rules can apply to a business sale in administration. The treatment of staff, consultation and particular liabilities needs employment advice before commitments are made. A change of company name on a payslip should not be treated as a complete explanation of employees’ rights.
The original company remains responsible for liabilities that do not transfer, with creditor claims addressed through the insolvency process. Security, guarantees and contract terms require separate review. A director’s personal guarantee is not automatically released because a new company buys the business.
When might another route be more suitable?
If the company can fund continued trading, a trading administration may allow a different sale process. If affordable repayment can preserve the existing company, a CVA or negotiated agreement may merit review. Where no viable business or funded buyer exists, liquidation may be more appropriate.
Ask for a comparison showing likely asset proceeds, costs, operational risks and creditor outcomes for each realistic option. Explain why a rapid sale is necessary, rather than treating speed as the objective in itself. Bring a short cash forecast, buyer funding evidence and a list of consents needed to keep the business operating.
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Common questions
It may be possible, but connected-party rules, valuation, funding and disclosure requirements need to be satisfied.
The transaction and legal position determine what transfers. It is not safe to assume that all liabilities disappear or automatically move to the buyer.
No timetable should be guaranteed before the facts, funding and legal requirements have been reviewed.
Not necessarily. It can preserve the business through a sale while the original company remains in an insolvency process. Ask what is being sold and what happens to the original company afterwards.
No. They are different routes under the connected-person disposal rules. A report must meet the qualifying requirements and be considered by the administrator.
Sources: Official guidance 1 · Official guidance 2.
Updated 1 November 2026. General guidance, with procedural detail focused on England and Wales. Requirements can differ in Scotland and Northern Ireland.