Administration expenses
Produced in partnership with William Wilson of South Square
Administration expenses

The following Restructuring & Insolvency guidance note Produced in partnership with William Wilson of South Square provides comprehensive and up to date legal information covering:

  • Administration expenses
  • The statutory charge
  • Priority of expenses
  • What counts as an administration expense?

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 in priority to the claims of preferential creditors, floating charge holders and unsecured creditors.

There are a number of expenses classified under the Insolvency Act 1986 (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 comes further down. Interpretation, therefore, can be very important.

Administration expenses are a topic close to the heart of all insolvency practitioners, as their own remuneration is classified as an expense. They are often a