Until now, the general approach has been that a company cannot claim privilege against its own...
In an earlier blog we considered the government's proposals for imposing greater controls on so-called pre-pack sales, where the sale of an insolvent company's business and assets is agreed in principle before the company goes into administration, and carried out immediately after the administrator is appointed. Concerns have been raised by creditors about the fact that the procedure enables existing management or owners to continue the business without the burden of its current debts, however there would appear to be little evidence that creditors' rate of recovery in a pre-pack is any worse than following an open marketing of the business.
Draft regulations were published in June and included an obligation on insolvency practitioners to give creditors 3 business days' notice of the terms of any proposed connected party sale where there has been no open marketing of the assets.
This proposal was widely criticised on the basis that it would do very little to assist creditors, but would create a delay in the process which might significantly derail the prospect of rescuing the business.
Revised draft regulations are due to be published at the beginning of 2012 with a view to being adopted during the course of next year.