Pre-pack in case of impending bankruptcy
Over-indebted companies can avoid bankruptcy with a pre-pack. A pre-pack, short for a ‘pre-packaged sale’, prevents the entrepreneur from losing control of the struggling company and having to hand it over to a bankruptcy trustee. A pre-pack procedure makes it possible to complete a controlled bankruptcy and aims to limit the loss of value of a company, in particular the viable parts of a company, wherever possible.
What is a pre-pack?
A company faced with possible bankruptcy can request the court to appoint an intended bankruptcy trustee. This often concerns a lawyer or bankruptcy trustee, in this case also referred to as an undisclosed administrator, who investigates via a pre-pack whether a restart after bankruptcy is possible. During the investigation by the undisclosed administrator, the company continues its ‘normal’ activities. By making preparations, a company can respond immediately in the event of a bankruptcy being pronounced and decide to restart or effect a sale.
Pre-pack: sale or restart
A pre-pack procedure, a promising alternative for suspension of payment, can be applied for when bankruptcy is inevitable. The appointment of an undisclosed administrator for a pre-pack bankruptcy is not published. In this way, a company can, through a pre-pack, prepare for a reorganization or relaunch or negotiate a sale with interested parties in relative calm. The moment a company is declared bankrupt, the undisclosed administrator, now the bankruptcy trustee, can sell the company or parts thereof or make a quick restart. This is the advantage of the pre-pack procedure.
Feasibility of a pre-pack procedure
Bankruptcy requires a tailor-made approach. The process of a pre-pack can nevertheless be divided into a fixed plan of action. To determine whether a pre-pack bankruptcy is feasible and desirable for a company facing (possible) bankruptcy, it is important to determine whether the preconditions for a pre-pack procedure can be met. The following are taken into consideration:
- Is there enough liquidity to bridge the pre-pack period?
- What arguments can be used to substantiate a pre-pack (employment, interest of creditors)?
- Have potential buyers presented themselves?
- Is there enough liquidity to complete the restart?
Conditions pertaining to staff
Currently, the pre-pack solution is not particularly popular, because all staff will be transferred to the restarter, despite bankruptcy having been pronounced. This is the result of a ruling by the European Court. In the meantime, there is another case being handled by the Supreme Court and it is expected that in the event of a pre-pack, cutting the workforce during a restart, in addition to debt restructuring, will be allowed again under certain conditions.
A complex process carried out thoroughly
Bankruptcy is a complex process that requires the right knowledge when acting. Is your company experiencing financial difficulties and are you facing possible bankruptcy? If so, ask for a no-obligation consultation with a specialist in bankruptcy law at Fruytier Lawyers in Business. We will be happy to provide you with advice and insight into your situation. During the initial introduction, we will explore your wishes and investigate, for example, whether the preconditions of a pre-pack can be fulfilled.