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Administrators’ rates liabilities

We mention in a previous post and, briefly, in comments the decision in the Trident Fashions case, Exeter City Council v Bairstow & Ors [2007] EWHC 400 (Ch) (02 March 2007), that the administrators were found liable to pay rates as an administration expense. The decision applies to administration cases generally and, in addition to causing consternation with its retrospective effect, it has significantly increased the cost of administration where there are substantial property assets.

The impact can sometimes be mitigated by applying to the court under para 79(1), Schedule B1, Insolvency Act 1986, for an order that the administrators be discharged with effect from the passing of a resolution to put the company into creditors' voluntary liquidation. Such was the decision in Re TM Kingdom Limited, as reported here by Theo Anderton and in the Law Society of Scotland's Journal here by Alistair Burrow. Sylvia Yendall notes here that it was also held in Re OM Recoveries Limited that an administrator may apply to court under para 79(1) when he considers it necessary or desirable.

Advantages of liquidation in thses circumstances are that unoccupied property rates are not a liquidation expense and a liquidator is able to disclaim onerous property.

 

 

Date: 30th July, 2007
Author: Chris Laughton

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