Pre-pack administrations called into question by MPs A report by the Department for Business select committee, published today, has warned that there are "concerns" with pre-packs and calls for greater openness and higher levels of compliance to make sure rules are not being abused. Pre-pack administrations involve the sale of a business and its assets being agreed before it enters insolvency proceedings. The practice is controversial because creditors are wiped out by the administration and the buyers are sometimes directors of the company or connected parties. In 2011, the Insolvency Service estimated that 25pc of the 2,808 companies that entered administration that year used the pre-pack procedure; and that nearly 80pc of pre-pack sales were to connected parties. The BIS select committee report said that despite efforts to make the pre-pack process more transparent in recent years, administrations of these kind "remain a controversial practice." Under early Coalition proposals, insolvency practitioners would have had to notify creditors in advance of a pre-pack and allow three days for the proposals to be challenged. The decision to scrap the changes - following 18 months of consultation - provoked a furious response from industry groups. In written evidence to the BIS committee, the Association of British Insurers criticised pre-packs extensively, warning that they are being actively marketed by restructuring advisers as a convenient way in which to "dump debt" and start afresh free of troublesome creditors. The BIS select committee report argues that concerns remain, warning that a lack of transparency results in abuse of the system. It recommends stronger penalties by way of larger fines and stronger measures of enforcement. The report also suggests that creditors should be given greater help understanding their rights.