Vol 13 (2016) - Issue 1

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Supervision and Efficiency of the Pre-pack: An Anglo-Dutch Comparison

Introduction
The pre-pack procedure has been developed in insolvency practice to effect a sale of a company to a third party, but it is no ordinary sale. It is done to save the company, because the company has been able to predict its insolvency. The sale is negotiated before the company formally applies for insolvency and it is effected immediately after the appointment of an insolvency practitioner. The pre-pack was first seen in practice in the USA, where a modern insolvency law has been in place since 1978. The main aim of Chapter 11 of the Bankruptcy Code is to save the company and is firmly seen as part of the so-called 'rescue culture'. By way of contrast, UK insolvency law is focused on creditor compensation, with its original aim being to collect debt by seizing the debtor’s assets. The pre-pack is not designed for this purpose: its main purpose is to rescue the company instead. The pre-pack is heavily critiqued in Britain because it allegedly undermines the position of the creditor, in particular since the September 2003 entry into force of the Enterprise Act 2002. The Act allows initiation of administration without involvement of the court. It is said to be modelled after the Australian voluntary administration method. The main aim of administration is to rescue a company instead of entering it into liquidation. It has greatly contributed to the further development of a 'rescue culture' in the UK with insolvency practitioners beginning to use the pre-pack regularly. Nonetheless, the pre-pack is not without its criticisms, as will be seen below. Coincidentally, the use of the pre-pack in furthering the ideal of rescue has come to be seen favourably by jurisdictions around the world. This article will look at the Netherlands, where recently, the Government has proposed legislating for the pre-pack and making the procedure available to Dutch insolvency practitioners. It is the intention of this article to see whether the criticisms of the pre-pack procedure should be taken into account in determining the ideal shape of any such adoption into Dutch law.

Critique of the pre-pack
In August 2007, Sandra Frisby, Associate Professor at Nottingham University, analysed pre-packaged administrations at the request of the professional body, R3. R3 wanted to strengthen the confidence of its members and their clients in the pre-pack by mapping its existing problems. One of the most urgent problems turned out to be the insufficient provision of information by insolvency practitioners to unsecured creditors. The absence of rules also formed a problem for the insolvency practitioners.