Administration expenses
Produced in partnership with Jamil Mustafa of South Square Chambers
Administration expenses

The following Restructuring & Insolvency practice note produced in partnership with Jamil Mustafa of South Square Chambers provides comprehensive and up to date legal information covering:

  • Administration expenses
  • The statutory charge
  • Priority of expenses
  • Insolvency (England and Wales) Rules 2016 (IR 2016), rule 3.51—priority order of expenses
  • What counts as an administration expense?
  • Expenses properly incurred by administrator in performing their functions
  • Necessary disbursements
  • Remuneration and pre-administration costs

This Practice Note will give a basic overview of what amounts to an administration expense and some of the case law on this topic.

Expenses of an administration are payable from the assets of the company in administration after fixed charge creditors but in priority to the claims of preferential creditors, floating charge holders and unsecured creditors. This order of priority (or ‘waterfall’) is altered by the Corporate Insolvency and Governance Act (CIGA 2020) where an administration is preceded by a moratorium under Part A1 of the Insolvency Act 1986 (IA 1986).

There are a number of expenses classified under the IA 1986 and the Insolvency (England and Wales) Rules 2016 (IR 2016), SI 2016/1024. The Insolvency Rules are specific on the order of priority of payment to be applied to different classes of expenses. Therefore, not only is it important for a creditor to establish that their claim is an expense of the administration if they want to put themselves ahead of other creditors, but also to establish under what category that expense falls, to get as far up the priority order as possible.

By way of example, solicitors' fees have been held to be either 'expenses properly incurred by the administrator in performing his duties', or 'any necessary disbursement' (see order below). The former comes at the top of the priority order, the latter

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