In an announcement earlier today (8 October), the Government said the new laws will 'improve confidence and transparency' in pre-pack administration sales.
Pre-pack administrations involve arrangements to sell part or the whole of a company’s business or assets prior to the company entering into administration.
The sale is completed on or shortly after the appointment of an administrator and the speed of the transaction helps preserve the value of the business while saving jobs.
Pre-pack administration sales are widely considered to be a valuable rescue tool for businesses facing financial distress.
However concerns have been raised that arrangements may not always be in the best interests of creditors.
The Government says these new measures will give the general public and creditors 'reassurance that their interests are being protected alongside that of the distressed business', as well as 'increase confidence' in the insolvency regime.
"Pre-pack sales play an important role in rescuing viable businesses, while protecting jobs and supporting our economy," says Lord Callanan, Minister for Corporate Responsibility.
"As we continue to tackle Covid-19, it is more important now than ever that people have confidence in the insolvency process.
"This new law will ensure all sales to connected parties are properly scrutinised."
The impact of the Coronavirus lockdown on the hospitality sector has led many restaurant groups fall into administration, only to then be acquired in a pre-pack sale.
High-profile examples include Bella Italia and Café Rouge operator Casual Dining Group, which was acquired in a pre-pack administration deal by private equity firm Epiris in August and rebranded as The Big Table; and Italian casual dining chain Carluccio's, which was acquired by the Boparan Restaurant Group back in May for just £3.4m.