Businesses: Pre-pack Administration

House of Lords written question – answered on 13th October 2011.

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Photo of Lord Myners Lord Myners Labour

To ask Her Majesty's Government whether they have made any estimates of the number of small and medium-sized enterprises that have failed, or suffered significant business damage, as a result of the treatment of business creditors in pre-pack administration; and how many employees have directly and indirectly lost employment through pre-packs.

Photo of Baroness Wilcox Baroness Wilcox The Parliamentary Under-Secretary of State for Business, Innovation and Skills

While the Government recognise that pre-packs can make an important contribution to rescuing businesses and preserving jobs, the question raises an important issue about potential damage to small and medium-size enterprises and consequential loss of employment caused by pre-packs. No direct estimates have been made of the number of SME enterprises that have failed or on the direct or indirect impact on the loss of employment.

In March 2011 the Government announced proposals to tighten controls on pre-packs where the administrator intends to sell a significant proportion of the assets of a company or its business to a connected party, in circumstances where there has been no open marketing of the assets.

The Government believe that the impact of the proposals on small and medium-sized enterprises will be beneficial and are continuing to discuss the detail of draft legislation with stakeholders.

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