Insolvency Doctor Knock: not Prozac but Related Party Pre-Packs (RPPP’s)

This article examines the implications of the EU’s newly adopted pre-pack insolvency framework, originally proposed in 2022. The directive introduces a harmonised mechanism in which the sale of a business is prepared prior to insolvency and executed immediately after by a court-appointed practitioner. We argue that this framework risks enabling companies to carry out workforce restructurings with minimal friction, particularly when related‑party pre-packs are permitted. In such cases, existing shareholders can transfer assets to a new entity, dismiss all employees on insolvency grounds without consultation duties, and selectively rehire staff. Because the old company is liquidated and creditors remain behind in the insolvency estate, obligations such as social plans can be avoided. This creates powerful incentives for owners to use insolvency strategically, undermining employee and creditor protection as well as market discipline and fair competition. The article therefore calls for stronger safeguards against abuse within the new European pre-pack regime.