Fears that creditors are being left with a raw deal from 'pre-pack' administration agreements has sparked new recommendations to shore up the insolvency industry.

A independent review found that some sales were not transparent and did not deliver good outcomes for customers and small businesses when companies went bust – while fresh measures were also needed to boost business survival rates.

Teresa Graham, the senior accountant that spearheaded the government-commissioned review, said her plans would look to improve the results for creditors without adding extra costs.

The recommendations include:

• Creating a 'pre-pack pool' where details of a proposed sale to a connected party can be shown to an independent person prior to the sale taking place.

• Requesting connected parties to complete a 'viability review' for the new company to improve its chances of success.

• Requiring valuations to be carried out by a valuer who holds professional indemnity insurance, to increase confidence that the sale is for a fair price.

• Ensuring proper marketing is undertaken in order to maximise sale proceeds.

'My review of pre-pack administrations over the last nine months shows that they have a unique place in the insolvency market,' Mrs Graham said.

'However there must be major changes in the way they are administered. I believe my proposals, implemented as a complete package, will lead to real improvements in pre-packs.

'I hope the insolvency industry, as well as all those in business, will embrace these measures as it is in everyone's interest that they are successful. I believe they will lead to real improvements in transparency and scrutiny.'

The announcement comes as business secretary Jenny Willott announced proposals to strengthen the regulation of the insolvency profession.

The proposals include new regulatory objectives and stronger powers for the Insolvency Service as an oversight regulator.

Speaking about Mrs Graham's recommendations, Mrs Willott said: 'When these types of business sales are carried out properly, they allow the viable parts of the business to continue operating and jobs are saved. But it is also important for those who are owed money to know they are getting the best possible deal in the circumstances. Transparency is vital.

'Teresa Graham has come up with a set of recommendations which will ensure people get back as much money as possible and make pre-pack deals more transparent. We will be working with business and industry to implement these recommendations in full and we believe it will help restore trust and confidence in pre-pack deals. We will monitor progress closely and will take the power to legislate if necessary.'

Giles Frampton, president of insolvency trade body R3, said: 'Teresa Graham's report is an excellent contribution to the pre-pack debate. We fully support her conclusion that there is a place for pre-packs in the UK's insolvency framework.

'The report's recommendations are innovative, measured, and worth exploring.

'It is also encouraging to see the report's recommendations focus on more than just the insolvency practitioner's role in a pre-pack. Instead – and rightly – the report turns the spotlight on directors involved in a connected party pre-pack.'

• Do you have a business story for the Eastern Daily Press? Contact business writer Ben Woods on 01603 772426 or email ben.woods@archant.co.uk