procedural and substantive interests of all creditors have been reasonably dealt with. This could involve (as Ellis and Davies have both urged) a requirement that the IP is required to explain publicly why the proposed outcome is fair to all creditors.

A step further would be involved if the US regime were to be used as a model so that solicitations of agreements to pre-pack were to be governed by statutory requirements designed to ensure that any information is adequate or timescales involved are reasonable and that proposals are distributed to substantially all affected creditors and equity interest holders.

Such provisions would arguably offer a response to the feared mischiefs involved in pre-packs but there may be a downside involved in extending statutory regulation into the currently pre-formal area of commercial life. First, this would be likely to increase the complexity of turnaround procedures as well as the cost. Second, this might undermine the advantages of pre-packs and reduce their value as ways of effecting turnarounds before reputations and market positions are lost. If those running the pre-pack process were to have to operate procedures that would give them confidence of compliance with the law, this would involve very considerable risks to continuity of trading, business relationships and rescue objectives. Third, such an extended system of control might prove only partially successful in providing control over pre-formal deal-making. The effect might be to produce not only a series of new legal uncertainties (as parties contest such issues as whether a discussion constitutes a solicitation) but also more resort to ‘presolicitation’ deals of a highly secretive nature. Critics would caution that such ‘over-regulation’ is liable to lead to less transparency in turnaround negotiations, not more, and to less efficiency in rescue.

Conclusions

If pre-packs are a significant problem, it does seem possible to devise responses. Why, though, should yet more regulation be introduced into business life? Are levels of potential prejudice to creditors great enough to justify new monitoring systems and rules? To recap: the case for action rests on the prejudice to unsecured creditor interests caused by the use of pre-packs and the difficulties that vulnerable creditors have in challenging unsatisfactory pre-packs through the procedures established by the Insolvency Act 1986. Where pre-packs are used cynically it may well be the case that it is extremely difficult to mount challenges: first, because

the informational hurdles are high; second, because the administrator’s discretion is wide and difficult to challenge; and third, because pre-packs have a self-fulfilling effect in so far as, once agreed, they genuinely do make other rescue options less feasible.

The issue of pre-packs points again to the need for insolvency lawyers to come to grips with the issue of displacement and the propensity of corporate control systems to shift across from traditional insolvency processes and scenarios and into the pre-insolvency stages of governance. A clear message is that statutory processes such as the post-EA administration procedure can never be seen as complete or lasting solutions. Negotiations will always be conducted in the new shadows of the latest legislative procedures. The constant challenge may be to assess how statutory regimes sit alongside informal negotiations so that fresh light can be cast into the developing shadows.