Pre-pack deals with former owners fail more often, study finds
Guardian-commissioned research found 44% of pre-packs bought by connected parties led to a second insolvency by July 2026, versus 26% for unconnected buyers.
What you need to know
Research commissioned by the Guardian from Turnstone Intelligence found that pre-pack sales to connected parties, such as former directors, were more likely to end in a second insolvency and paid unsecured creditors far less than sales to unconnected buyers.
- 44% of pre-packs bought by connected parties resulted in a second insolvency by July 2026, against 26% for unconnected buyers
- 65% of connected-party deals allowed deferred payments, versus 28% for unconnected buyers
- Unsecured creditors received a return in 23% of connected-party deferred-payment cases, at 1.58p in the pound
- The study covered 544 pre-pack sales among 1,738 administrations commenced in England and Wales in 2019
- R3 said the cases predated 2021 rules that increased scrutiny of connected-party pre-packs
What the research found
The Guardian commissioned Turnstone Intelligence to examine official documents on more than 1,700 administrations commenced in England and Wales in 2019. Turnstone used AI agents to read the filings, identifying 544 pre-pack sales. It said the numbers were checked by other computer models and verified by humans.
Among pre-packs where assets were bought by connected parties, 44% had resulted in a second insolvency by July 2026. For unconnected buyers, the figure was 26%. Turnstone managing director Ben Sims said the size of the gap surprised him and that the results would feed debate over the impact on taxpayers and creditors.
Payments and creditor returns
Connected parties were more often allowed to defer payment: 198 of 303 connected-party administrations, or 65%, used future instalments, compared with 28% of unconnected buyers.
Unsecured creditors, typically including HMRC, received a return in 23% of connected-party cases involving deferred payments, at 1.58p in the pound. Where the buyer was unconnected, 36% of pre-packs produced repayments, at 7.86p in the pound. Riz Mokal, an honorary law professor at University College London, said the findings were consistent with earlier work and reinforced concern that such deals can let non-viable businesses shed liabilities.
Industry response
R3, the insolvency industry body, said the research covered only cases predating 2021 rules that increased scrutiny of connected-party pre-pack sales and added safeguards, including requiring independent evaluators to clear such sales. Chief executive Caroline Sumner said a connected-party pre-pack is a legitimate, regulated process overseen by licensed practitioners, and that concerns about phoenixism should be distinguished from it.
Did the study cover sales made after the 2021 pre-pack rules took effect?
No. Turnstone examined administrations commenced in England and Wales in 2019. R3 said those cases predated 2021 rules that increased scrutiny of connected-party pre-packs and introduced safeguards such as independent evaluators.
Sources & context
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