The government is considering introducing regulations regarding pre-packaged administration sales, amid fears they could be abused to pass on pension liabilities to the Pension Protection Fund (PPF).

In a written question response, MP for Rochester and Strood, Kelly Tolhurst, stated that the government is “aware of concerns” over the transparency of pre-packed administration sales.

She revealed that the government is currently evaluating whether legislative measures are required to regulate pre-packaged sales to a connected person.

The government is particularly concerned about instances where a business is sold to a person connected with the old company.

It has previously liaised with the PPF on pre-packed administration sales, which made clear that it did not “fundamentally take issue” with pre-packs.

However, concerns that do arise in relation to the sales will be referred to The Pensions Regulator for investigation.

A pre-packed administration sale is where the sale of all or part of a business is arranged before the existing company entered formal insolvency and realised on or immediately after the appointment of the administrator.

Tolhurst said that it is “a valuable business rescue tool” as they “help to avoid a deterioration of the value of the company’s business between appointment of the administrator and sale”.

She continued: “This means there is more money available for creditors, including the pension scheme.

“In most cases where pre-packs are used, the only alternative would be the collapse of the business and the loss of all employees’ jobs.”

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