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What should you do if you’re affected by Carillion’s insolvency?

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Construction firm, Carillion PLC, announced this week that it and its five sister companies had been placed into compulsory liquidation. Harrison Drury’s construction and insolvency teams look at what this means for its creditors and sub-contractors.

The Carillion group becoming insolvent will not come as a complete surprise to the industry, given the number of profit warnings issued over the last six months and its failure to secure a rescue deal with lenders. But the fact that the insolvency has taken the form of compulsory liquidation demonstrates how serious the financial plight of the group actually is.

What has happened to Carillion?

Carillion PLC has been placed into compulsory liquidation with the Official Receiver being named liquidator. PwC has also been drafted in as a special manager to assist with the liquidation process.

Administration is a more common procedure for companies in Carillion’s position, as this would have allowed the administrators to trade the business while searching for buyers of the business or parts of it.

However, now the liquidator has been appointed, there is no realistic prospect of the business surviving in any form. The priority for the Official Receiver over the next few months will be to realise Carillion’s assets for the benefit of its creditors.

What can Carillion’s creditors do?

The unsecured creditors of Carillion’s companies can expect to recover little, if any, of the money owed to them, potentially putting their jobs and businesses at risk.

While the liquidation process is at a very early stage, creditors are advised to be proactive in terms of any claims they have made. Creditors need to make sure that they’re in a position to respond quickly to any correspondence received in relation to the liquidation and any claims they may have made against the group, or any claims that the group may have made against them.

Issues surrounding the retention of title goods, materials and the recovery of equipment from site may arise. The relevant contractual documentation will need to be reviewed and advice on how best to protect property rights within the liquidation process should be sought.

How should sub-contractors proceed?

The position is even more uncertain with regards to suppliers and sub-contractors who are currently engaged by one of the Carillion companies, especially while the long-term future of the Carillion group’s portfolio of private and public infrastructure and service contracts remains uncertain.

Those parties are being advised that “unless told otherwise, all employees, agents and subcontractors are being asked to continue to work as normal and they will be paid for the work they do during the liquidations.”

This should be confirmed at the earliest possible opportunity before further work is undertaken on a Carillion project. All existing contracts with Carillion should be reviewed so that it’s clear exactly what rights and obligations apply when undertaking works and services for a company in liquidation.

The liquidation of Carillion will take some time to progress. If you are concerned that your company could be exposed in the near future or if you have any questions, Harrison Drury have team of construction and insolvency specialists. Please call the team on 01772 429210 for further assistance. 


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