Contracting out of expense claims in administration and liquidation
Produced in partnership with Matthew Thorn of Norton Rose Fulbright LLP
Contracting out of expense claims in administration and liquidation

The following Restructuring & Insolvency practice note produced in partnership with Matthew Thorn of Norton Rose Fulbright LLP provides comprehensive and up to date legal information covering:

  • Contracting out of expense claims in administration and liquidation
  • Background to the practice of contracting out of expense claims
  • Contracting out of priority rules
  • The reasonableness of exclusion clauses
  • Ranking and provable debts
  • Use in practice and the future

It has long been standard practice for administrators and liquidators to seek to limit their liability when entering into contracts on behalf of a company. It is becoming more common for office-holders to also seek to contract that any liabilities incurred by them in relation to that contract will not constitute expenses of an administration or a liquidation given priority over other creditors on distribution.

This Practice Note covers the use of such exclusion clauses—reviewing the background to the practice of contracting out of expense claims, the issues that arise in such practice and matters to be considered by counterparties in agreeing such clauses. For a detailed analysis of the law in this area, see: Hamish Anderson, Contracting out of expense claims in administration and liquidation: Journal of International Banking and Financial Law (2014) 3 JIBFL 154.

Background to the practice of contracting out of expense claims

In the course of an administration or liquidation, an office-holder may enter into any number of contracts on behalf of a company in exercising his powers and functions. The two main categories of contracts are those related to the provision of ongoing goods or services over the course of the appointment (this will be limited in a liquidation to the extent necessary for the beneficial winding up rather than ongoing trading) and those related to the sale of assets

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