BEFORE I start I must hold my hand up and admit to the fact that I don't have much time for administrators - that happy band of accountants brought in to 'rescue' ailing businesses.
It's only fair because as a member of the press they don't have much time for me either and trying to get information out of them is like trying to pull teeth.

The reason for this reticence to talk to the press is beyond me, seeing as how their raison d'etre is to save the ailing business by finding an investor or purchaser for all or part of it - a process which in order to get the best deal for creditors would surely benefit from the oxygen of publicity.
Not that I am alone in my mistrust of administrators. Many creditors see them as the villain of the insolvency process particularly when it comes to so-called pre-pack deals.

Pre-packs seem to have become increasingly common where there is a need to sell the business quickly to avoid a negative reaction from customers or staff, and/or where there is no availability of funding to see the company through administration while a better rescue option is investigated.

This quick sale, however, inevitably attracts suspicion from some creditors. It is seen as secretive by creditors who are then faced with a fait accompli at the creditors' meeting and no redress except the costly possibility of trying to sue the administrator.

So it is timely, in the current climate that new rules were introduced on January 1 that now require administrators to reveal to creditors the name of the buyer and the price paid when carrying out a pre-pack administration.

The new rules will require administrators to explain to creditors the background to their appointment and the reasons why they considered that a pre-pack sale would be the best outcome for creditors. Administrators will not only have to reveal the name of the purchaser of the business, they will also have to provide details of any connection that the purchaser had with the former directors or shareholders and the price paid.

The Insolvency Service has said it will be looking to use its enforcement powers to clamp down on any directors who misuse the administration process to disadvantage creditors or seek to gain benefit for themselves.

Whatever happens, I would suggest that it still leaves creditors with a fait accompli. Although under the new rules the administrator must indicate why the pre-packaged sale was undertaken, this information will not be revealed until after the event.

The biggest critics of the current system maintain that bad directors can plan for a pre-pack months in advance, line up an administrator -- and then be back running the business debt-free almost immediately.

Unfortunately, in the current economic climate with the government running scared of failed companies and rising unemployment, I cannot see the powers-that-be ever being over zealous in their pursuit of any, shall we say, dubious administration deals.

Forget caveat emptor, in dealings with any customers the new law is caveat venditor - let the supplier beware!

Neil Everitt
Editor