New rules for pre-pack administrations could make it harder for owners to regain control of failing businesses.
The Business, Innovation and Skills minister Edward Davey said he wanted to “improve transparency and confidence” in pre-pack deals.
Under the proposals, stakeholders in a company would have to be given a three-day notice period ahead of a pre-pack deal.
Davey said this would give creditors the opportunity to express concerns.
Administrators would need to explain the reasons behind conducting a pre-pack in documents to be filed at Companies House, in order to allow suppliers and other parties to assess the viability of the new ‘phoenix’ business.
Administrators would also have to explain how the sale price represented best value for creditors.
The new law could come into play before the end of the year, and would apply to sales of businesses back to connected parties in an administration, where there has been no open marketing assets.
According to the Daily Telegraph, insolvency trade body R3 warned that one “unintended consequence” of the proposals could be increased liquidations.