S Hopewell FCICM
Director - Pre Pack Pool
CONNECTED PERSONS ADMINISTRATION
2 YEARS ON: AN EVALUATORS PERSPECTIVE
Insolvent organisations are
able to voluntarily undergo independent scrutiny of any sale
to a connected party.
2015
2015-2020
The Pre Pack Pool operated as the only source of report.
Uptake remains poor,
referrals covering just an
estimated 8% of eligible cases in 2019 and 13% in 2020.
2019
THE ROUTE TO REGULATION
New regulations, The Administration (Restrictions on Disposal etc. to Connected Persons) Regulations 2021, now mandate the process.
APRIL 2021
PRE 2015
No specific
independent scrutiny
of connected sales
168 referrals
Circa 12% of eligible cases
18 negative opinions (10.7%)
No second opinions as no other operators
150 positive opinions (89.3%)
2020 Insolvency Service Pre Pack Report: 17% failure rate
Deals between just £1 - £65m
VOLUNTARY REGULATIONS
NOV 2015 - APRIL 2021
150 referrals
Circa 50% of eligible cases
8 negative opinions (5.3%)
4 given a positive opinion by an alternative Evaluator
142 positive opinions (94.7%)
19 of the new businesses have subsequently failed (13%)
Deals between £20k - £190m
MANDATORY REGULATIONS
MAY 2021 - DEC 2022
REFERRALS AND OUTCOMES: Pre Pack Pool cases
Circa 50% reduction
in negative opinions
30.7% decrease in
failure rates
Deal value highs increased by £125m
POSITIVES: PRE-REGULATIONS
Report independence
Credibility of sale
Comfort to creditors
INCREASE IN TRANSPARENCY
What went wrong?
Plan to avoid repeat pitfalls, change approach,
restore credibility
OPPORTUNITY TO REVIEW
Highly encouraged
by Evaluators
Supports opportunity
to review
VIABILITY REPORT
Even before the 2021 regulations were imposed, there were positives brought about simply by the process being available on a voluntary basis.
At least 20 operators
Increases choice
of Evaluators available
to applicants
GROWTH IN MARKET
Better preparation, improved application quality
Particularly seen when assistance provided by Administrator
INCREASED DIALOGUE
2014: 25% failure rate
2020: 17% failure rate
2023: 13% failure rate
INCREASED SURVIVAL
POSITIVES: POST-REGULATIONS
Following the 2021 regulatory introduction, we started to see...
Lack of detail and valuations of assets
being purchased
Lack of marketing information
POOR APPLICATIONS
Viability statements
Summary of events
Details of the offer, assets
or creditors
COMMON OMMISSIONS
AREAS OF POTENTIAL DEVELOPMENT
We believe that the following areas should be considered
for legislative or operational review:
2nd or more opinions can be sought
Provides opportunity to improve submission - or ‘Evaluator for hire’?
‘OPINION SHOPPING’
Dividends for unsecured creditors marginally lower versus “standard Administration”
Not the key focus
DIVIDENDS LOWERED
AREAS OF POTENTIAL DEVELOPMENT
We believe that the following areas should be considered
for legislative or operational review:
CONCLUSION
Provides credibility to the sale and comfort to creditors that all sales have undergone the necessary scrutiny.
IMPROVED IMAGE
IMPACTED NUMBERS
Numbers don’t appear to be directly comparable to prior periods, indicating that the 2021 regulations may have had a negative impact on connected persons pre packs due to an added level of scrutiny.
Improved submission quality, an increased transparency, and a more active market
MARKET CHANGES
FUTURE DEVELOPMENT
Future development to the regulations will only stand to improve the situation for all parties.
S Hopewell FCICM
Pre Pack Pool
QUESTIONS?