Research commissioned by the Guardian from Turnstone Intelligence examined over 1,700 insolvency administrations from 2019 and identified concerning patterns in so-called “pre-pack” deals, where corporate rescues are arranged before formal insolvency proceedings begin. The study revealed that when assets were reacquired by connected parties such as former directors and shareholders, the outcomes diverged markedly from cases involving unconnected buyers.
According to the findings, 44% of pre-pack transactions with connected-party purchases resulted in a second insolvency by July 2026, compared to just 26% when an unconnected party acquired the assets. The data also showed significant differences in how payments were structured and creditor recoveries achieved. Connected parties were permitted to defer payments in 65% of administrations, whereas unconnected buyers used deferred payment arrangements in only 28% of cases.
Unsecured creditors, typically including tax authorities, recovered substantially less in connected-party deals involving deferred payments. These creditors received repayment in only 23% of such cases, averaging 1.58 pence per pound owed. By contrast, when unconnected buyers were involved, 36% of pre-pack administrations resulted in creditor repayments, averaging 7.86 pence per pound. The research methodology employed AI analysis of official insolvency documents, with results verified through additional computer models and human review.
The findings align with earlier research, including a 2014 government-commissioned study and a 2018 European Union-funded investigation, both of which similarly documented poorer outcomes in connected-party pre-pack administrations. Critics argue the practice allows non-viable businesses to eliminate unsecured liabilities while continuing operations, harming creditors and competitors. However, the insolvency industry body R3 noted that the research examined cases predating 2021 rule changes that introduced stricter scrutiny and additional safeguards for connected-party sales, including requirements for independent evaluators to approve such transactions.
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