SG
©istockphoto/btrenkel
For a moment, it was looking a little unnerving: the government was proposing to overhaul the pre-pack administration rules so beloved of financial services recruiters.
Under the proposed overhaul, any company contemplating a pre-pack would have had to notify creditors in advance and allow them three days to challenge the proposals.
Instead, things will carry on the same.
This means, says Peter Windatt of Business Recovery and Insolvency, that a recruitment firm can still go into administration at midnight one day and still reemerge under a slightly different name but precisely the same management the next morning, free of debt.
Pre-packs have proven especially popular among financial services recruiters in recent years, the best known practitioner being Kinsey Allen, which peformed a pre-pack in June 2010, only to go irrevocably under in May 2011.
Windatt says pre-packs are particularly appropriate for the recruitment sector, where companies tend to have few assets other than employees. Under a pre-pack, employees retain their employment and pension rights and typically move seamlessly from one company to the next. Under a standard administration procedure, there’s often a long period of uncertainty during which employees leave or are made redundant.
In the event that 2012 proves a repeat of the second half of 2011, some ofLondon’s financial services recruiters will have the government to thank for their continued employment.
I did say that this is how pre-packs can sometimes work. However, I do not advocate simply ditching your creditors through the use of Pre-Packs. Unfortunately, however, with recruitment (or advertising) firms the assets really are the people and their, often personal, contacts – there isn’t much value in the desks, computers etc. Accordingly, if a pre-pack isn’t undertaken those people will simply go elsewhere. Administrations, like any insolvency process, are tools in the toolkit and advice should be taken, before acting. This should be from someone looking to give the best advice for you and your business, not simply the best advice for themselves. The earlier advice is sought, the more likely it is that you won’t simply be another job for the insolvency profession. Peter Windatt, BRI Business Recovery and Insolvency
Sarah – next time why don’t you just let Peter pen the article?!
Ah yes, the beauty of pre-pack. A Mayfair ’boutique investment bank’ promises its employees bonuses for staying on during a cash-flow ‘blip’ for eight months. It doesn’t pay them salary, or guaranteed bonuses, just keeps on promising more candy if they’ll stick around. Every month there’s a new cash injector: guaranteed investor from Russia, or Ukraine, or Azerbaidjan….or even Monaco. Eventually, it goes into pre-pack, having had enough time to off-shore any decent assets, so the (born-again Christian – believe it or not) chairman has no liability. After pre-pack, a marvellous phoenix firm emerges, almost identical name, same bunch of ****ts on the director list, zero guilt trip and no backstory to cripple its future business. And a bunch of people who worked for nothing for 3/4 of a year for absolutely sweet fanny adams will never see a bean. Nice.
…and bankers wonder why they have a crzp reputation?