Rent raises questions for company insolvency

Published on April 10, 2012 by Crawfords Accounting

An individual instance of company insolvency can be unnecessarily complicated by advanced rent payments, according to a report from R3 – the Association of Business Recovery Professionals.

The organisation explains that rent is already a major area of expense for companies, and caused significant issues recently as the end of March brought about quarterly rent bills for many firms.

However, during company insolvency, it can worsen matters still further, as administrators are expected to pay the full rate of rent, even if the occupying company is only partially trading.

“An administrator might only be using part of the premises for a short period of time,” points out R3 president Frances Coulson.

“Adding rent as an ‘expense of administration’, the specific costs of actually trading the business, makes this rescue scenario less viable.”

Insolvency practitioners may be able to negotiate special rates with your landlord, without your company directors facing accusations of wrongful trading.

This is a risk R3 warns of – but adds that ‘pay as you go’ or monthly rent is an option in some cases, which could help to ease the quarterly burden of three months’ worth of rent being paid in one go.


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