Disbursement in Liquidation
If your limited company is entering liquidation, you may come across the term “disbursement” in reports from the insolvency practitioner.
But what exactly does it mean, and how does it affect your company’s creditors—or you personally?
This guide will break down the meaning of disbursements in simple, practical terms.
Whether you’re a company director facing closure or simply reviewing insolvency paperwork, we’ll explain everything you need to know.
What Does “Disbursement” Mean?
Disbursement simply means the act of paying out money—usually from a larger fund or on behalf of someone else.
In business terms, it’s a payment made from a company or individual to cover costs, often reimbursed later.
In insolvency, disbursements refer to expenses paid by the insolvency practitioner (IP) during the course of a liquidation or administration.
These costs are typically not part of their professional fees but are necessary to carry out the procedure.
Common Examples of Disbursements in Liquidation
Here are some typical disbursements in a Creditors’ Voluntary Liquidation (CVL):
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Statutory advertising (e.g., Gazette notices)
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Bonding costs (to insure the IP’s conduct)
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Company search fees
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Postage or printing for creditor communications
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Court fees (in Compulsory Liquidations)
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Third-party professional services (e.g., asset valuation or auctioneers)
These are passed onto the insolvent estate and itemised separately from the liquidator’s fee.
Why Are Disbursements Important for Company Directors to Understand?
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They Affect the Final Distribution to Creditors
Every disbursement reduces the amount available to creditors. Transparency is key. -
You Might Question Certain Charges
Knowing what’s standard vs. questionable helps you feel more confident in the process. -
They Appear on the Statement of Affairs & Progress Reports
As a director, you’ll see these figures during the liquidation. Understanding them avoids confusion.
Are Disbursements the Same as Liquidator’s Fees?
No. Liquidator’s fees are the charges for the IP’s time and expertise, whereas disbursements are out-of-pocket expenses paid to third parties.
👉 Some firms may bundle these together in quotes—but the best practice is to show them separately.
Who Approves Disbursements?
In most cases:
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Unsecured creditors approve the fee structure and disbursements in a CVL.
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In Members’ Voluntary Liquidations (MVL), shareholders may approve them.
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In Compulsory Liquidation, they’re overseen by the Official Receiver or the court.
Transparency is a legal and ethical requirement.
How Are Disbursements Paid?
They are paid from the company’s remaining funds (the estate).
If there are insufficient funds, IPs may limit certain disbursements or seek alternative arrangements—but some essential ones (like Gazette ads) are legally required.
Can Disbursements Be Challenged?
Yes, creditors can challenge excessive or unusual disbursements. A good insolvency practitioner will:
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Provide a clear breakdown
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Justify each cost
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Avoid unnecessary spend
VAT on Disbursements – What You Should Know
Some disbursements attract VAT, while others may be treated as client costs. For example:
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Recharged services (like printing) = usually subject to VAT.
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‘True disbursements’ (paid as agent, like court fees) = may not attract VAT.
This matters for the accuracy of the IP’s accounting and transparency.
Final Thoughts – Disbursements Shouldn’t Be a Mystery
Disbursements can feel like hidden costs—but with the right explanation, they become a routine part of the liquidation journey.
At Business Helpline, we’re committed to transparency.
If you’re unsure about charges or disbursements in your liquidation, we’re always on hand to help.
Need to talk through a liquidation quote or fee breakdown?
📞 Call our 24-hour helpline on 0800 088 2142
