What you did not know about pre-pack administration
You have probably heard many people say that liquidating a business through pre-pack arrangements is the best option. However, this method of preventing business bankruptcy does not apply to every situation. One such situation is when the old company directors owe the company some money. Such amounts are shown as overdrawn directors’ accounts. This means that the liquidator will first pursue the directors just as he would normal company debtors. In pursuit of such debts, the liquidator can even take legal action against the company directors. This can lead to personal bankruptcy for the directors. With pre-pack administration posing a personal risk to the directors, they have to find another way to deal with the business bankruptcy. The best option for such a situation is using a company voluntary arrangement. This allows the company to propose a settlement for all the creditors while maintaining the directors’ position. In most CVA cases, the company proposes to settle 50% of the creditors’ debts and have the rest written off.