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Fair Game — administration rents and creditors’ returns

In recent years, some high-profile (and controversial) court decisions have swelled the list of liabilities that must be paid as expenses of an administration. Administration expenses enjoy ‘super priority’, being payable out of floating charge realisations ahead of the claims of preferential creditors and floating charge holders. So when an otherwise unsecured claim ranks as an administration expense, it clearly benefits the relevant creditor, but at the expense of the floating charge holder. It can also consume valuable resources that could otherwise be available to trade an ailing business.

Recently, though, the tide has been turning. In July last year, the Supreme Court held that financial support directions, or contribution notices, issued to a company by the Pensions Regulator will rank as a ‘provable debt’ of a company, and not as an expense of the administration.

Now, in the context of the administration of the Game group of companies, the Court of Appeal has revisited the rules on payment of rent as an administration expense. It has ruled that administrators should pay rent as an administration expense pro rata for the period that they use a property for the benefit of the administration. This is regardless of when the relevant rent payment day falls or whether the rent is payable in arrears or in advance…

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