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Somewhat surprisingly, it has been held that business rates are an
expense of the administration or liquidation, and that means they are
payable before the insolvency practitioner’s own fees, and also before
any floating charge holder’s debts.
Prior to Enterprise Act 2002, rates would not normally be an ‘expense of
the administration’ (although they would be an expense of a liquidation). But, the wording used in Enterprise Act 2002 is similar to that used in
the liquidation legislation, with the result that the court has now decided
that rates in administrations are now subject to the same rules as the
rates in liquidations. Thus, the position is that post-Enterprise Act 2002
administrations will now see rates being treated as an expense of the
administration.
This decision may logically be correct, but it does go against the rescue
culture of EA 2002. From a selfish point of view, insolvency practitioners
may well be concerned because they may have to pay back millions from
their own fees to cover previously unpaid business rates. For the future,
it may discourage creditors from backing the rescue (via administration)
of businesses that have large property holdings (eg retailers). Exeter v
Vivian Murray [2007] EWHC 400 (Ch).
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April 2007 |
