Wednesday 26th Oct 2016 - Logistics Manager

RHA welcomes plan to change pre-pack rules

The Road Haulage Association has welcomed plans for changes to the law on pre-pack administrations.

Business minister Edward Davey has put forward proposals to improve the transparency of, and confidence in, pre-packaged sales in administration cases.

He said: “Particular concerns have been raised about sales of assets back to the current management, or other connected party, something that is often referred to as ‘phoenixism’.

“Where such sales are at undervalue, creditors get less than they should. Competitors who pay their debts in full also suffer. I want to make sure that creditors have a fair chance to have their voice heard. I also want to enable others to scrutinise such transactions after the event to ensure that deals being struck are fair in the circumstances.

RHA chief Geoff Dunning said: “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.”

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

Davey said the government wanted to inject greater transparency into the process. “We intend to require administrators to give notice to creditors where they propose 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.”

Welcoming the proposal, Dunning said: “We have been campaigning for some time as to the unfairness of the existing system and will be studying the proposed changes in detail.”