The government has also strengthened requirements for insolvency practitioners on how they and company directors market and value struggling businesses.

Directors and other ‘connected parties’ interested in acquiring a business through a pre-pack can ask the Pre Pack Pool, which opened for business yesterday, to review that sale. One of 20 experienced business professionals from a range of sectors will come to a decision within 48 hours, for a fee of £800 plus VAT, a sum calculated to be fair but also enable Pre Pack Pool, a limited company, to trade sustainably.

The changes are in response to years of lobbying by a number of industry bodies, including the BPIF, which prompted an independent review into pre-packs for the government by senior accountant Teresa Graham last year.

Her recommendations, published in June 2014, acknowledged the economic benefits of pre-packs but highlighted the need for greater transparency particularly when businesses are sold to people, known as ‘connected parties’ involved with the company. She said the reforms “transform trust in pre-pack insolvency as a form of business rescue”.

BPIF representative on the committee Nigel Lyon said: “Pre-packs have been very much open to abuse in the past. They are appropriate in some cases but maybe what somebody wants to do is drop the debt.

“A business would close on the Friday night and it would open again on Monday morning. They will continue to trade without the burden of debt and having to pay creditors. You’ve still got exactly the same people running it. If they were rubbish business people before, what’s going to change?

"They would also be a position to offer very competitive rates in a very competitive market.”

Those interested in being reviewed can apply to the Pre Pack Pool via a secure online portal and will get one of three responses: ‘the pre-pack is not unreasonable’, ‘the case for a pre-pack is not unreasonable but there are minor limitations in the evidence provided’ or ‘case for pre-pack not made’.  

Creditors can learn the results of any Pre Pack Pool review through the insolvency practitioner involved with the case. They will, in turn, be expected to recommend the process to clients they are advising about a pre-pack. Previously creditors were not given any prior warning of any pre-pack deal.

Lyon, who is a chartered accountant with a background in turnaround, said the reforms would also cut down on “ambulance chaser” firms which go after troubled companies and push the pre-pack solution when it is not necessarily appropriate.

He added that the checks would help creditors thinking of trading with the new company, mitigate potential reputational damage to purchasers and will make it harder for pre-pack companies to do business if they have not been assessed by the Pre Pack Pool.

“You can rest assured that other people in the trade won’t want to deal with them,” he said.

Director of Pre Pack Pool Ltd, Duncan Grubb, who is also former chair of the British Property Federation’s insolvency committee, said the reforms would strike a balance between transparency and the discretion needed for business and job rescue.

The BPIF will be represented on the Pre Pack Pool committee alongside ACCA, the British Property Federation, CARB, the Chartered Institute of Credit Management, ICAEW, ICAS, the Insolvency Practitioners Association, the Insolvency Service, the Institute of Directors, and insolvency trade body, R3. These bodies contributed funding to establish the Pre Pack Pool company.

Minister for small business, industry and enterprise, Anna Soubry said: “Business rescue is an important part of our entrepreneurial culture and anything that brings clarity, transparency and trust for creditors is to be welcomed.

“The fact that these reforms have the support of trade bodies, industry groups, regulators and creditor groups, shows that it is possible to balance increasing trust in the pre-pack process with giving businesses a second chance.”

Last year some 20,000 businesses went through an insolvency process, with less than 5% involving a pre-pack. Around two-thirds of those pre-packs involved purchasers already connected to the insolvent company.