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Hereford United supporter David Whittall has sent BN some more information about 'Pre-Pack', something Tommy Agombar and his associates may have planned in advance of possible administration of the club.
David makes the point that since former chairman David Keyte once said the leases were worth £1M, would any administrator sell the leases for peanuts? The administrators are duty bound to get the best return for creditors.
The business must be insolvent and have no viable prospect of recovery. In short, a business is considered to be legally insolvent when the amount it owes in current and contingent debts and liabilities exceeds the combined value of its assets, and/or when the business has defaulted on a debt of more than £750 and has failed to comply with a statutory payment demand.
The insolvency practitioner and company directors must be able to show that no other solutions would have been more beneficial to creditors. Company directors and insolvency practitioners are required by law to act in the best interest of the insolvent company's creditors. Therefore, a pre-pack administration cannot be used unless it results in the best outcome for creditors.
The purchaser must be able to pay fair market value for the assets out of their own personal funds. This is what makes a pre-pack ethical - the proceeds from the sale of assets are distributed amongst creditors, so it is essentially the same is if an unrelated third-party purchased the assets during liquidation, except the third-party can be one or more directors of the insolvent company.
