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End insolvency abuse by Phoenix pre-packs say property chiefs

Tighter monitoring is needed to stop companies abusing the insolvency process and profiting from the recession, says the British Property Federation (BPF).

The BPF has backed a call from a government select committee for the closer monitoring of insolvency practitioners and their use of pre-pack administrations.

A Business and Enterprise Committee report published today states that “public confidence in the insolvency regime will be damaged unless prompt, robust and effective action is taken to ensure that pre-pack administrations are transparent and free from abuse.”

It also states that ‘phoenix pre-packs’, where the existing management buy back the business and continue to trade clear of the original debts, cause particular outrage and “fuel understandable concerns about illegitimate, self-serving alliances between directors and insolvency practitioners.”

The select committee has welcomed the introduction of new insolvency rules that aim to increase the transparency of pre-packs and the Insolvency Service’s commitment to monitor their implementation.

Committee chairman, Peter Luff, said: “We need a regime that stops the abuse of pre-pack administrations, protects creditors from unduly high fees from insolvency practitioners, and in which those who try to cheat the system know that they will be found out.”

BPF commercial policy director, Ian Fletcher, said: “A number of our members have expressed concerns about the way that certain pre-pack administrations have been transacted. The Committee is right to urge continued vigilance, both onf pre-packs and of insolvency practitioners’ fees.

“Insolvency practitioners have clear standards on good practice and it is essential that these are followed. We strongly urge any landlord that feels they are a victim of a sham pre-pack, or a lack of transparency, to report it to the Insolvency Service.”

Click here for the select committee summary.

For more information and all PR and media queries, please contact Andrew Teacher, Head of Media, on 020 7802 0113/ 07968 124545/ ateacher@bpf.org.uk