Vol 17 (2020) - Issue 6

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Government Reforms to Pre-pack Sales to a Connected Party in Administration

Synopsis
Pre-pack sales have always been controversial in some circles. On 8 October 2020, the UK Government published draft regulations on connected party prepack sales in administration. With the cold economic headwinds brought about by COVID-19, the need for business rescue tools that are fair, transparent and value-preserving has become ever more pressing. In this article, we discuss the legislative proposals that have been tabled regarding pre-packs, and our thoughts on how the new regulations will work in practice. In summary, we consider the proposals to be broadly sensible and proportionate, striking a reasonable balance between creditor protection and the need for an efficient and effective corporate rescue tool.