ShareSoc has made many representations in the past about the abusive use of pre-pack administrations. In the case of publicly listed companies, they usually mean the ordinary shares become instantly worthless. The latest case of a pre-pack in a listed company is that of RSM Tenon. This company (an accountancy practice oddly enough) got into difficulty by taking on excessive debt for a growth strategy. Baker Tilly were negotiating to buy the business for a rock bottom price. But yesterday it was announced that instead the company had been put through a pre-pack and sold to Baker Tilly by the administrator. You can tell it’s a pre-pack (i.e. one arranged before the administrator had been formally appointed) by the wording of the announcement issued by RSM Tenon which says “Immediately following their appointment, the Joint Administrators [Deloittes] agreed a sale of the Company’s trading entities to Baker Tilly”.
Whether any better deal could have been done, or the interests of ordinary shareholders protected in this case, may be debatable. But there is one odd connection.
Vince Cable’s BIS Department have launched yet another inquiry into pre-pack administrations (in this case an “independent one”) because there have been continuing concerns about their operation. For example, he recently said “You do have these so-called phoenix companies where owners typically shut down their companies in order to wipe out their debts and start again the following day under a slightly different name”. This inquiry will be led by Teresa Graham and will report next year – the terms of reference have yet to be announced. Teresa Graham is an accountant who has been involved in other Government quangos – she chairs the Administrative Burdens Advisory Board of HMRC at present, but also has some non-executive directorships in smaller companies. More interesting perhaps is that she previously worked for Baker Tilly! Will she be examining this particular example of a pre-pack one wonders?