The Court of Appeal has ruled that rent represents an expense during business insolvency proceedings, regardless of the date it was due, and the date the company entered administration.
Previously, English law generally held that the due date of the rent and the date administration was entered into both have a bearing on whether the rent due is classed as a debt or as an expense.
The distinction between the two is significant: expenses must be paid in full before any funds recovered through business insolvency proceedings can be used to remunerate creditors.
In its latest ruling, relating to the so-called ‘Game case’ or ‘Game Station case’, the Court of Appeal has decided that all rent due for the period during which an insolvency office-holder retains possession of a property must be treated as an expense.
Anne Willcocks, director of external affairs at the Insolvency Service, said: “We welcome this judgment as it brings clarity to a very important part of business rescue.
“We will consider the implications of the ruling carefully and will be liaising with stakeholders over the coming weeks.”