Pre-packaged insolvency is a kind of bankruptcy

Bankruptcy

Bankruptcy is a legal status of an insolvent person or an organisation, that is, one that cannot repay the debts owed to creditors. In most jurisdictions bankruptcy is imposed by a court order, often initiated by the debtor....

 procedure, where a restructure plan is agreed in advance to a company declaring its insolvency. In the United States

United States

The United States of America is a federal constitutional republic comprising fifty states and a federal district...

 pre-packs are often used in a Chapter 11 filing. In the United Kingdom

United Kingdom

The United Kingdom of Great Britain and Northern IrelandIn the United Kingdom and Dependencies, other languages have been officially recognised as legitimate autochthonous languages under the European Charter for Regional or Minority Languages...

, pre-packs have become popular since the Enterprise Act 2002

Enterprise Act 2002

The Enterprise Act 2002 is an Act of the Parliament of the United Kingdom which made major changes to UK competition law with respect to mergers and also changed the law governing insolvency bankruptcy.-Structure:*Part 1 The Office of Fair Trading...

, which has made administration the dominant insolvency procedure. Such arrangements are also available in Canada

Canada

Canada is a North American country consisting of ten provinces and three territories. Located in the northern part of the continent, it extends from the Atlantic Ocean in the east to the Pacific Ocean in the west, and northward into the Arctic Ocean...

 under the Companies' Creditors Arrangements Act.

United Kingdom

A pre-pack is the process of selling the assets of a company immediately after it has entered administration. It is sometimes the case that the previous directors or management purchase the assets of the company from the administrator and set up a new company. This process has advantages in that it enables the administrator to realise a greater amount for the assets due to business continuity and the goodwill of the company are preserved. The employees of the company are also usually transferred to the new company preserving jobs. However, Pre-packs have attracted criticism because of the appearances it gives to unconnected parties that the company has just continued without its creditors. SIP 16 was introduced in January 2009 to assist Insolvency Practitioners in pre-pack cases. It was designed to make the process more transparent for creditors and to ensure that fair value was obtained for the assets.

In November 2009, the Office of Fair Trading announced a study into corporate insolvencies, with particular focus on pre-pack administrations. It will report on whether the insolvency market is operating efficiently, with enough freedom of competition between insolvency practitioners and whether consumers and creditors are being treated as fairly as possible. A recent example of a pre-pack is the sale of the assets of Cobra Beer

Cobra Beer

Cobra Beers main product is an extra-smooth premium beer with an alcohol strength of 5% volume. The beer was founded in 1989 by Karan Bilimoria, who thought that Britain needed a smoother, less gassy lager, which would appeal to both ale drinkers and lager drinkers alike...

 to Coors

Coors Brewing Company

The Coors Brewing Company is a regional division of the world's fifth-largest brewing company, the Canadian Molson Coors Brewing Company and is the third-largest brewer in the United States...

immediately after Cobra Beer entered administration. This allowed the brand to continue, save jobs but also leave suppliers out of pocket by an estimated £75 million.