Are stricter rules needed to tackle rogue directors who use “pre-pack” administrations to avoid paying their debts? Or will increased legislation lead to more company liquidations, creditors losing out and job losses?

That was the subject of a debate on the Business Club forum in response to the Government’s decision to delay the implemen-tation of rules designed to crack down on so called “phoenix” firms – ones that are created when companies which are about to collapse are restructured and sold to new owners, minus some of the debts and without the consultation of unsecured creditors.

Chris Rayner, owner of ID card-printing company Eagle Technologies, said the legislation was unnecessary. “More rules [would make] life more difficult for the majority who are good in order to stamp out the handful who are bad,” he said.

Will Black, of insolvency trade body R3, said pre-packs have “an image problem” although on average they return slightly more money to secured creditors than a straightforward business sale. “[That] does not suggest widespread abuse,” he said.

However, it is typically unsecured creditors who lose out in pre-pack sales, which inspire particular anger when companies are sold back to the existing directors. Disagreements over a proposal for a three-day notice period for connected parties ahead of a...Read more on this story---> CLICK HERE