What counts as an expense?

Produced in partnership with William Willson of South Square Chambers and Sam Laughton of Ten Old Square

Practice notes

What counts as an expense?

Produced in partnership with William Willson of South Square Chambers and Sam Laughton of Ten Old Square

Practice notes

What are expenses?

All fees, costs, charges and other expenses incurred in the course of winding up (Insolvency (England and Wales) Rules 2016 (IR 2016), SI 2016/1024, rr 6.42 and 7.108), administration (IR 2016, SI 2016/1024, r 3.50) or bankruptcy (IR 2016, SI 2016/1024, r 10.148) proceedings are treated as expenses of the winding up, administration or, as the case may be, of the bankruptcy (in each case, from 6 April 2017).

Liquidation and bankruptcy

From 6 April 2017, the rules relating to liquidation and bankruptcy expenses are set out respectively at IR 2016, SI 2016/1024, r 6.42 (creditors’ voluntary winding up), IR 2016, SI 2016/1024, r 7.108 (winding up by the court) and IR 2016, SI 2016/1024, r 10.149 (bankruptcy). Since they contain a number of provisions drafted in near-identical terms, the following comments apply to all of these rules.

Whether expenditure by a liquidator or trustee in bankruptcy (trustee) should count as an expense of the liquidation or bankruptcy is not a matter which the

William Willson

South Square Chambers

William Willson was called to the Bar in 2006 after a career as a journalist/documentary producer. His core areas of practice include insolvency/restructuring, company law and commercial litigation/arbitration. His recent cases include the Lehman Brothers 'RASCALS' litigation ([2011] EWCA Civ 1544, [2010] EWHC 2914 (Ch)) and the Northern Rock shareholder compensation litigation ([2011] UKUT 408 (TCC)).

Sam Laughton

Barrister, Ten Old Square

Sam Laughton’s practice encompasses a broad range of Chancery litigation and advisory work, with a particular focus on both commercial, private and agricultural disputes relating to property. He is particularly skilled in multidisciplinary litigation, drawing on his expertise in: land contracts; restrictive covenants and easements; commercial and residential landlord and tenant; personal and corporate insolvency; commercial disputes and company law; family and corporate trusts; wills, probate and the administration of estates; and professional negligence arising out of these fields.

Jurisdiction(s):

United Kingdom

Key definition:

Insolvency definition

What does Insolvency mean?

This can be defined by two alternative tests (Insolvency Act 1986, s 123):

• cash flow test: a company is solvent if it can pay its debts as they fall due, no matter what the state of its balance sheet (Re Patrick & Lyon Ltd [1933] Ch 786);

• balance sheet test: a company which can pay its debts as they fall due may be insolvent if, according to its balance sheet, liabilities (including contingent liabilities) exceed assets.

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