Insolvency Act 1986, section 189

Interest on debts

Part IV Winding Up of Companies Registered under the Companies Acts

(1)In a winding up interest is payable in accordance with this section on any debt proved in the winding up, including so much of any such debt as represents interest on the remainder.

(2)Any surplus remaining after the payment of the debts proved in a winding up shall, before being applied for any other purpose, be applied in paying interest on those debts in respect of the periods during which they have been outstanding since the company went into liquidation.

(3)All interest under this section ranks equally, whether or not the debts on which it is payable rank equally.

(4) The rate of interest payable under this section in respect of any debt (“the official rate” for the purposes of any provision of this Act in which that expression is used) is whichever is the greater of—

(a)M11the rate specified in section 17of the Judgments Act 1838 on the day on which the company went into liquidation, and

(b)the rate applicable to that debt apart from the winding up.

(5)In the application of this section to Scotland—

(a)references to a debt proved in a winding up have effect as references to a claim accepted in a winding up, and

(b)the reference to section 17 of the Judgments Act 1838 has effect as a reference to the rules.

Definitions used in section 189 1

the company

2 Section 233B does not apply in relation to a contract for the supply of goods or services to a company (“the company”) where any of paragraphs 3 to 11 applies.

Defined in Sch.4ZZA para.2 · see it in the full Act

Cases considering section 189 13

The Joint Administrators of LB Holdings Intermediate 2 Limited v The Joint Administrators of Lehman Brothers International (Europe) and others

[2017] UKSC 38 · 17 May 2017Interprets

Statutory interest in liquidation is payable only from a surplus after proved debts have been paid. The provision does not carry unpaid administration interest into a later liquidation and cannot be supplemented judicially. (see paras [113]-[123]; [139]-[143]) The provision allows post-liquidation statutory interest at the judgment-debt rate rather than the contractual rate, subject to the statutory surplus. (see para [53])

The Joint Administrators of LB Holdings Intermediate 2 Ltd v Lehman Brothers Holdings Inc

[2015] EWCA Civ 485 · 14 May 2015Limits

Section 189 is identified as the liquidation provision governing statutory interest after payment of proved debts. It is read with rule 2.88 to determine the effect of an administration followed by liquidation (see paras [43]-[44], [103]-[111]). Section 189(2) does not displace accrued interest protected by rule 2.88(7) where a surplus arose during administration. The later liquidation surplus must be identified after taking account of that prior statutory burden (see paras [104], [107]-[111]).

Granville Technology Group Limited (in liquidation) & Ors v Chunghwa Picture Tubes Ltd & Ors

[2024] EWHC 13 (Comm) · 8 February 2024Disapplies

The court held that section 189 concerned interest payable on proved debts where a surplus remained after payment of debts in a winding up. It did not govern the rate of interest recoverable under section 35A in this claim (see paras [328]-[330]).

1 more judgment, and what each says about section 189, are in the case-law panel in the full Act.

Amendments and notes

6 notes from legislation.gov.uk

Modifications

  1. C562Ss. 185-189 applied (with modifications) (4.1.2024) by S.I. 2021/716, Sch. 1 para. 3 (as amended by The Payment and Electronic Money Institution Insolvency (Amendment) Regulations 2023 (S.I. 2023/1399), regs. 1(2), 20)
  2. C577S. 189 applied (with modifications) (1.12.1994) by S.I. 1994/2421, art. 8(3)(9), Sch. 4 Pt. II para. 24
  3. C578S. 189 applied (with modifications) (17.2.2009 for certain purposes, otherwise 21.2.2009) by Banking Act 2009 (c. 1), ss. 103, 263(1)(2) (with s. 247); S.I. 2009/296, arts. 2, 3, Sch. para. 2
  4. C579S. 189 applied (with modifications) (6.6.2013) by The Collective Investment in Transferable Securities (Contractual Scheme) Regulations 2013 (S.I. 2013/1388), Pt. 3 reg. 1, Sch. 2 paras. 3, 5 Table (with reg. 24)
  5. C580S. 189(4) applied (S.) (7.6.2013) by The Energy Supply Company Administration (Scotland) Rules 2013 (S.I. 2013/1047), rules 1, 46(2)(b) (with rules 3, 46(7))

Marginal citations

  1. M111838 c. 110.