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RHA welcomes announcement on pre-pack rules

The RHA has welcomed today’s announcement by business minister Edward Davey that the law on pre-pack administration is likely to be changed in the next twelve months.

“We are pleased to see that the minister has acknowledged that the current system does not enjoy a sufficient level of confidence and is felt to be subject to abuse”, said RHA chief executive Geoff Dunning.

RHA members have been concerned that some phoenix companies that result from pre-pack administrations are benefitting from the dubious trading practices of its predecessor.

“We welcome changes that will allow creditors to be warned that a pre-pack sale is imminent as this at least means that they will be in a position to either stop the sale, or make an offer for the assets”, Dunning continued. “We have been campaigning for some time as to the unfairness of the existing system and will be studying the proposed changes in detail.”

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  • Carole Hughes - 27/04/2011 10:06

    Tougher legislation is required to protect creditors and to prevent directors from repeatedly abusing pre-pack administrations to avoid debt. As a result of the Insolvency Service’s failure to police the industry, some IPs are actively encouraging the use of pre-packs and are failing in their duty to consider the interests of creditors. Legislation is needed to clampdown on these IPs who advertise pre-packs as a “choice” in order to write off debt and continue business as usual. The proposed measures such as the three day warning to creditors that a pre-pack sale is imminent are inadequate and would do very little to prevent unscrupulous directors from building up debts and then exploiting the pre-pack system to avoid paying creditors. Whilst we welcome the Governments Statement of Insolvency Service (SIP 16), it does not tackle the directors who abuse the system and creditors are being misled into accepting pre-packs as they believe they have no other choice. SIP 16 has failed and needs to be given statutory force, so it is properly interpreted and complied with. As a result of this, Daniels Silverman is calling for: • Statutory force to be given to the Statement of Insolvency Practice (SIP 16) and the introduction of penalties for non-compliance • More stringent rules under SIP 16 where directors have been involved in one or more pre-pack administrations • Tougher scrutiny by the Insolvency Service against potential rogue directors • A clampdown on Insolvency Practitioners (IPs) marketing pre-packs as a way for directors to avoid their debts Carole Hughes, managing director, credit management and debt collection company, Daniels Silverman www.danielssilverman.co.uk

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