Liquidation in the construction industry - Revision history

Designing Buildings at 08:31, 11 October 2020

2020-10-11T08:31:16Z

← Older revision		Revision as of 08:31, 11 October 2020
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	* Vesting certificate.		* Vesting certificate.

−	[[Category:~~Other_legislation~~]] [[Category:DCN_Legislation]] [[Category:~~Property_law~~]] [[Category:~~Regulations~~]] [[Category:~~DCN_Regulation~~]] [[Category:Client_procedures]] [[Category:Contracts_/_payment]] [[Category:Procurement]]	+	[[Category:DCN_Definition]] [[Category:DCN_Guidance]] [[Category:DCN_Legislation]] [[Category:Other_legislation]] [[Category:Property_law]] [[Category:Regulations]] [[Category:Client_procedures]] [[Category:Contracts_/_payment]] [[Category:Procurement]]

Designing Buildings at 08:33, 16 March 2020

2020-03-16T08:33:55Z

← Older revision		Revision as of 08:33, 16 March 2020
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	* Project bank accounts.		* Project bank accounts.

−	~~= Find out more =~~	+	= Related articles on Designing Buildings Wiki =
−		+
−	=== Related articles on Designing Buildings Wiki ===	+

	* Advance payment bond.		* Advance payment bond.
	* Carillion.		* Carillion.
	* Collateral warranties.		* Collateral warranties.
		+	* Government procurement post-Carillion.
	* Insolvency.		* Insolvency.
	* Off site goods and materials.		* Off site goods and materials.
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	* Vesting certificate.		* Vesting certificate.

−	[[Category:Other_legislation]] [[Category:Property_law]] [[Category:Regulations]] [[Category:Client_procedures]] [[Category:Contracts_/_payment]] [[Category:Procurement]]	+	[[Category:Other_legislation]] [[Category:DCN_Legislation]] [[Category:Property_law]] [[Category:Regulations]] [[Category:DCN_Regulation]] [[Category:Client_procedures]] [[Category:Contracts_/_payment]] [[Category:Procurement]]

Designing Buildings: moved Liquidation of contractors in the construction industry to Liquidation in the construction industry

2019-09-30T15:40:53Z

moved Liquidation of contractors in the construction industry to Liquidation in the construction industry

← Older revision

Revision as of 15:40, 30 September 2019

Designing Buildings at 07:11, 19 January 2018

2018-01-19T07:11:11Z

Designing Buildings at 14:57, 17 January 2018

2018-01-17T14:57:55Z

← Older revision		Revision as of 14:57, 17 January 2018
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	= Liquidation of the main contractor =		= Liquidation of the main contractor =

−	Liquidation is less common that administration in the construction industry. In the case of Carillion in ~~2017~~, it is thought that liquidation was chosen as there were insufficient remaining funds to appoint an administrator. Contractually the consequences are the same, treated simply as 'insolvency'.	+	Liquidation is less common that administration in the construction industry. In the case of Carillion in 2018, it is thought that liquidation was chosen as there were insufficient remaining funds to appoint an administrator. Contractually the consequences are the same, treated simply as 'insolvency'.

	Insolvency of contractors is relatively common due to the low margins that they typically operate with, the high risk of project costs increasing and constant cash flow and payment issues.		Insolvency of contractors is relatively common due to the low margins that they typically operate with, the high risk of project costs increasing and constant cash flow and payment issues.

Editor at 10:20, 17 January 2018

2018-01-17T10:20:57Z

← Older revision		Revision as of 10:20, 17 January 2018
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	= Introduction =		= Introduction =

−	The term ~~‘Insolvency~~' describes the inability of a debtor to pay its debts. In the United Kingdom insolvent individuals are made 'bankrupt', while companies are put into 'liquidation' or 'administration'. In cases of administration, a key objective is to try to ensure the company survives, whereas in liquidation, the company will generally not survive.	+	The term ‘insolvency' describes the inability of a debtor to pay its debts. In the United Kingdom, insolvent individuals are made 'bankrupt', while companies are put into 'liquidation' or 'administration'. In cases of administration, a key objective is to try to ensure the company survives, whereas in liquidation, the company will generally not survive.

	Insolvency proceedings are administrative processes instigated by either the insolvent entity or one of their creditors to recover assets so for disposal, the proceeds of which are distributed to creditors.		Insolvency proceedings are administrative processes instigated by either the insolvent entity or one of their creditors to recover assets so for disposal, the proceeds of which are distributed to creditors.

Designing Buildings at 09:49, 17 January 2018

2018-01-17T09:49:29Z

← Older revision		Revision as of 09:49, 17 January 2018
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	= Liquidation of the main contractor =		= Liquidation of the main contractor =

−	In the construction industry, insolvency of contractors is relatively common due to the low margins that they typically operate with, the high risk of project costs increasing and constant cash flow and payment issues.	+	Liquidation is less common that administration in the construction industry. In the case of Carillion in 2017, it is thought that liquidation was chosen as there were insufficient remaining funds to appoint an administrator. Contractually the consequences are the same, treated simply as 'insolvency'.
		+
		+	Insolvency of contractors is relatively common due to the low margins that they typically operate with, the high risk of project costs increasing and constant cash flow and payment issues.

	Signs that a contractor may be in difficulties can include:		Signs that a contractor may be in difficulties can include:

Designing Buildings at 09:35, 17 January 2018

2018-01-17T09:35:21Z

← Older revision		Revision as of 09:35, 17 January 2018
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	The term ‘Insolvency' describes the inability of a debtor to pay its debts. In the United Kingdom insolvent individuals are made 'bankrupt', while companies are put into 'liquidation' or 'administration'. In cases of administration, a key objective is to try to ensure the company survives, whereas in liquidation, the company will generally not survive.		The term ‘Insolvency' describes the inability of a debtor to pay its debts. In the United Kingdom insolvent individuals are made 'bankrupt', while companies are put into 'liquidation' or 'administration'. In cases of administration, a key objective is to try to ensure the company survives, whereas in liquidation, the company will generally not survive.

−	Insolvency proceedings are administrative processes instigated by either the insolvent entity or one of their creditors to recover ~~all available~~ assets so for disposal, the proceeds of which are distributed to creditors.	+	Insolvency proceedings are administrative processes instigated by either the insolvent entity or one of their creditors to recover assets so for disposal, the proceeds of which are distributed to creditors.

	The Insolvency Act 1986 sets out four types of procedures governing the affairs of insolvent companies:		The Insolvency Act 1986 sets out four types of procedures governing the affairs of insolvent companies:
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	= Liquidation =		= Liquidation =

−	A registered company may be wound up either by court order or voluntarily. A court may wind up a company on presentation of a petition on ~~one of a variety of~~ grounds, such as being unable to pay its debts.	+	A registered company may be wound up either by court order or voluntarily. A court may wind up a company on presentation of a petition on grounds such as being unable to pay its debts.

	A company can be deemed unable to pay its debts for a number of reasons, including:		A company can be deemed unable to pay its debts for a number of reasons, including:
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	Where a winding up order is made, this has the effect of discharging all employees, ending any agency relationships, and dismissing the company’s directors.		Where a winding up order is made, this has the effect of discharging all employees, ending any agency relationships, and dismissing the company’s directors.

−	A liquidator is appointed to dispose of the company’s assets to discharge its liabilities to creditors, with any surplus being passed to whomever is entitled to it. Liquidators hold wide powers, constituting the governing body of the company and the receiver of its assets. They are entitled to their own costs before ~~the~~ proceeds are distributed to creditors.	+	A liquidator is appointed to dispose of the company’s assets to discharge its liabilities to creditors, with any surplus being passed to whomever is entitled to it. Liquidators hold wide powers, constituting the governing body of the company and the receiver of its assets. They are entitled to their own costs before proceeds are distributed to creditors.

	Once the process is complete the company is dissolved, which means that it has ceased to exist.		Once the process is complete the company is dissolved, which means that it has ceased to exist.
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	= Liquidation of the main contractor =		= Liquidation of the main contractor =

−	In the construction industry, ~~the~~ insolvency of contractors is common due to the low margins that they typically operate with, and constant cash flow and payment issues.	+	In the construction industry, insolvency of contractors is relatively common due to the low margins that they typically operate with, the high risk of project costs increasing and constant cash flow and payment issues.

	Signs that a contractor may be in difficulties can include:		Signs that a contractor may be in difficulties can include:
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	* Lack of response to communications.		* Lack of response to communications.

−	Most contracts will allow employers to terminate the ~~agreement~~ in the event of contractor insolvency and to cease payment. Typically, the contract will also allow them to employ others to complete the works and to use plant, tools, equipment, materials, temporary buildings and so on. However, the employer must be certain of the insolvency first, and may seek evidence to confirm ~~the~~ fact.	+	Most contracts will allow employers to terminate the employment in the event of contractor insolvency and to cease payment. Typically, the contract will also allow them to employ others to complete the works and to use plant, tools, equipment, materials, temporary buildings and so on to do so. However, the employer must be certain of the insolvency first, and may seek evidence to confirm that fact.

	This still leaves the employer having to find a new contractor and this can be time consuming and expensive, with other prospective contractors knowing that the employer is in a weak negotiating position. They client may also need consent from funding bodies to replace the contractor.		This still leaves the employer having to find a new contractor and this can be time consuming and expensive, with other prospective contractors knowing that the employer is in a weak negotiating position. They client may also need consent from funding bodies to replace the contractor.
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	* Outstanding disputes.		* Outstanding disputes.

−	The situation is complicated by prevalence of sub-contracting in the industry. The employers main contractual link to subcontractors is through the contractor, and this link is been broken by the insolvency. The employer may be protected to some extent by provisions such as collateral warranties and step in rights.	+	The situation is complicated by the prevalence of sub-contracting in the industry. The employers main contractual link to subcontractors is through the contractor, and this link is been broken by the insolvency. The employer may be protected to some extent by provisions such as collateral warranties and step in rights.

−	However, the complexity and extent of the supply chain means that the knock on effects of main contractor insolvency can be far reaching. This is exacerbated by the fact that late payment is rife, and so companies in the supply chain of the insolvent company might be owed very large sums of money that they may be unable to ~~cope~~ without.	+	However, the complexity and extent of the supply chain means that the knock on effects of main contractor insolvency can be far reaching. This is exacerbated by the fact that late payment is rife, and so companies in the supply chain of the insolvent company might be owed very large sums of money that they may be unable to continue without.

	Other provisions that might give the employer some protection from main contractor insolvency include:		Other provisions that might give the employer some protection from main contractor insolvency include:
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	* Performance bonds.		* Performance bonds.
	* Project bank accounts.		* Project bank accounts.
−
−

	= Find out more =		= Find out more =
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	* Advance payment bond.		* Advance payment bond.
		+	* Carillion.
	* Collateral warranties.		* Collateral warranties.
	* Insolvency.		* Insolvency.

Designing Buildings: moved Liquidation to Liquidation of contractors in the construction industry

2018-01-17T09:29:48Z

moved Liquidation to Liquidation of contractors in the construction industry

← Older revision

Revision as of 09:29, 17 January 2018

Designing Buildings at 09:29, 17 January 2018

2018-01-17T09:29:11Z

← Older revision		Revision as of 09:29, 17 January 2018
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	= Introduction =		= Introduction =

−	The term ‘Insolvency' describes the inability of a debtor to pay its debts. In the United Kingdom insolvent individuals are made 'bankrupt', while companies are put into 'liquidation' or 'administration'. In cases of administration, ~~the~~ key objective is to ~~see if there is a way~~ the company ~~can survive~~, whereas in liquidation, the company will generally not survive ~~the process~~.	+	The term ‘Insolvency' describes the inability of a debtor to pay its debts. In the United Kingdom insolvent individuals are made 'bankrupt', while companies are put into 'liquidation' or 'administration'. In cases of administration, a key objective is to try to ensure the company survives, whereas in liquidation, the company will generally not survive.

−	Insolvency proceedings are administrative processes instigated by either the insolvent entity or one of their creditors to recover all available assets so for disposal, the proceeds of which are distributed to creditors ~~to satisfy insofar as that is possible~~.	+	Insolvency proceedings are administrative processes instigated by either the insolvent entity or one of their creditors to recover all available assets so for disposal, the proceeds of which are distributed to creditors.

	The Insolvency Act 1986 sets out four types of procedures governing the affairs of insolvent companies:		The Insolvency Act 1986 sets out four types of procedures governing the affairs of insolvent companies:
Line 10:		Line 10:
	* Administration.		* Administration.
	* Receivership (less common following the enactment of the Enterprise Act 2000).		* Receivership (less common following the enactment of the Enterprise Act 2000).
−	* Winding up leading to ~~insolvency~~.	+	* Winding up leading to liquidation.

	= Liquidation =		= Liquidation =
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	A registered company may be wound up either by court order or voluntarily. A court may wind up a company on presentation of a petition on one of a variety of grounds, such as being unable to pay its debts.		A registered company may be wound up either by court order or voluntarily. A court may wind up a company on presentation of a petition on one of a variety of grounds, such as being unable to pay its debts.

−	A company is deemed unable to pay its debts for a number of reasons, including:	+	A company can be deemed unable to pay its debts for a number of reasons, including:

−	* A statutory demand for a debt exceeding £750 being served on the company and the company failing to satisfy ~~the~~ debt within three weeks.	+	* A statutory demand for a debt exceeding £750 being served on the company and the company failing to satisfy that debt within three weeks.
−	* ~~It has a~~ court judgment against it, ~~and~~ steps to enforce the judgment have been unsuccessful.	+	* A court judgment against it, where steps to enforce the judgment have been unsuccessful.
	* It is proved that the company is unable to pay its debts.		* It is proved that the company is unable to pay its debts.
	* Its assets are less than its liabilities.		* Its assets are less than its liabilities.

−	Where a winding up order is made, it has the effect of discharging all employees, ending any agency relationships, and dismissing the company’s directors.	+	Where a winding up order is made, this has the effect of discharging all employees, ending any agency relationships, and dismissing the company’s directors.

−	A liquidator is be appointed to dispose of the company’s assets ~~in order~~ to discharge its liabilities to creditors, with any surplus being passed to whomever is entitled to it. Liquidators hold wide powers, constituting the governing body of the company and the receiver of its assets. They are entitled to their own costs before the proceeds are distributed to creditors.	+	A liquidator is appointed to dispose of the company’s assets to discharge its liabilities to creditors, with any surplus being passed to whomever is entitled to it. Liquidators hold wide powers, constituting the governing body of the company and the receiver of its assets. They are entitled to their own costs before the proceeds are distributed to creditors.

−	Once the process is complete the company is dissolved, which means that it has ceased to exist ~~entirely~~.	+	Once the process is complete the company is dissolved, which means that it has ceased to exist.

	= Liquidation of the main contractor =		= Liquidation of the main contractor =

−	In the construction industry, insolvency is common due to the low margins that ~~companies~~ typically operate with.	+	In the construction industry, the insolvency of contractors is common due to the low margins that they typically operate with, and constant cash flow and payment issues.

−	Signs that a ~~company~~ may be in difficulties can include:	+	Signs that a contractor may be in difficulties can include:

	* Inactivity, or a lack of materials or plant on site.		* Inactivity, or a lack of materials or plant on site.
Line 41:		Line 41:
	* Lack of response to communications.		* Lack of response to communications.

−	Most contracts will allow employers to terminate the agreement in the event of contractor insolvency and to cease payment. Typically, the contract will also allow them to employ others to complete the works and to use plant, tools, equipment, materials, temporary buildings and so on. ~~The~~ employer must be certain of the insolvency first, and may seek evidence to confirm the fact.	+	Most contracts will allow employers to terminate the agreement in the event of contractor insolvency and to cease payment. Typically, the contract will also allow them to employ others to complete the works and to use plant, tools, equipment, materials, temporary buildings and so on. However, the employer must be certain of the insolvency first, and may seek evidence to confirm the fact.

−	~~However, this~~ still leaves the employer having to find a new contractor and this can be time consuming and expensive, with other prospective contractors knowing that the employer is in a weak negotiating position. They client may also need consent from funding bodies to replace the contractor.	+	This still leaves the employer having to find a new contractor and this can be time consuming and expensive, with other prospective contractors knowing that the employer is in a weak negotiating position. They client may also need consent from funding bodies to replace the contractor.

	There may also be issues about:		There may also be issues about:

	* The ownership of goods, materials and so on that the employer has paid for, but are not in possession of.		* The ownership of goods, materials and so on that the employer has paid for, but are not in possession of.
−	* Goods or materials that have been delivered to site but not fixed to the ~~buildings~~ or paid for (which suppliers may attempt to remove).	+	* Goods or materials that have been delivered to site but not fixed to the building or paid for (which suppliers may attempt to remove).
	* Defects in the works that the contractor has not rectified.		* Defects in the works that the contractor has not rectified.
	* Latent defects that may not yet be apparent.		* Latent defects that may not yet be apparent.
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	* Outstanding disputes.		* Outstanding disputes.

−	The situation is complicated by prevalence of sub-contracting in the industry. The employers main contractual link to subcontractors is through the contractor, and this link ~~has~~ been broken	+	The situation is complicated by prevalence of sub-contracting in the industry. The employers main contractual link to subcontractors is through the contractor, and this link is been broken by the insolvency. The employer may be protected to some extent by provisions such as collateral warranties and step in rights.

−	However, the complexity and extent of the supply chain means that the knock on effects of ~~liquidation~~ can be far reaching. This ~~can be~~ exacerbated by the fact that late payment is rife, and so companies in the supply chain of the ~~liquidated~~ company might be owed very large sums of money that they may be unable to cope without.	+	However, the complexity and extent of the supply chain means that the knock on effects of main contractor insolvency can be far reaching. This is exacerbated by the fact that late payment is rife, and so companies in the supply chain of the insolvent company might be owed very large sums of money that they may be unable to cope without.

−	~~The~~ employer ~~may be protected to~~ some ~~extent by provisions such as~~:	+	Other provisions that might give the employer some protection from main contractor insolvency include:

	* Parent company guarantees.		* Parent company guarantees.
	* Retention.		* Retention.
	* Performance bonds.		* Performance bonds.
−	* Step in rights.
−	* Collateral warranties.
	* Project bank accounts.		* Project bank accounts.
		+
		+

	= Find out more =		= Find out more =
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	* Off site goods and materials.		* Off site goods and materials.
	* Off-site goods and materials - legal issues.		* Off-site goods and materials - legal issues.
−
	* Parent company guarantees.		* Parent company guarantees.
	* Performance bonds.		* Performance bonds.
	* Project bank accounts.		* Project bank accounts.
−
	* Retention of title.		* Retention of title.
−
	* Retention.		* Retention.
	* Step in rights.		* Step in rights.
−
	* Vesting certificate.		* Vesting certificate.

	[[Category:Other_legislation]] [[Category:Property_law]] [[Category:Regulations]] [[Category:Client_procedures]] [[Category:Contracts_/_payment]] [[Category:Procurement]]		[[Category:Other_legislation]] [[Category:Property_law]] [[Category:Regulations]] [[Category:Client_procedures]] [[Category:Contracts_/_payment]] [[Category:Procurement]]

← Older revision		Revision as of 07:11, 19 January 2018
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	= Liquidation =		= Liquidation =

−	A ~~registered~~ company may be wound up either by court order or voluntarily. A court may wind up a company on presentation of a petition on grounds such as being unable to pay its debts.	+	A company may be wound up either by court order or voluntarily. A court may wind up a company on presentation of a petition on grounds such as being unable to pay its debts.

	A company can be deemed unable to pay its debts for a number of reasons, including:		A company can be deemed unable to pay its debts for a number of reasons, including:

−	* A statutory demand for a debt ~~exceeding £750~~ being served on the company and the company failing to satisfy that debt within three weeks.	+	* A statutory demand for a debt being served on the company and the company failing to satisfy that debt within three weeks.
	* A court judgment against it, where steps to enforce the judgment have been unsuccessful.		* A court judgment against it, where steps to enforce the judgment have been unsuccessful.
	* It is proved that the company is unable to pay its debts.		* It is proved that the company is unable to pay its debts.
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	= Liquidation of the main contractor =		= Liquidation of the main contractor =

−	Liquidation is less common that administration in the construction industry. In the case of Carillion in 2018, it is thought that liquidation was chosen as there were insufficient remaining funds to appoint an administrator. Contractually the consequences are the same, treated simply as 'insolvency'.	+	Liquidation is less common that administration in the construction industry. In the case of Carillion in 2018, it is thought that liquidation was chosen as there were insufficient remaining funds to appoint an administrator. Contractually, the consequences are the same, treated simply as 'insolvency'.

−	Insolvency of contractors is relatively common due to the low margins that they typically operate with, the high risk of project costs increasing and constant cash flow and payment issues.	+	Insolvency of contractors is relatively common due to the low margins that they typically operate with, the high risk of project costs increasing, and constant cash flow and late payment issues.

	Signs that a contractor may be in difficulties can include:		Signs that a contractor may be in difficulties can include:
Line 39:		Line 39:
	* Inactivity, or a lack of materials or plant on site.		* Inactivity, or a lack of materials or plant on site.
	* Late payments.		* Late payments.
−	* An increase in the number of ~~claims~~, or exaggerated claims.	+	* An increase in the number of disputes, claims and exaggerated claims.
	* Requests for advance payment.		* Requests for advance payment.
	* Lack of response to communications.		* Lack of response to communications.

−	Most contracts will allow employers to terminate the employment in the event of contractor insolvency and to cease payment. Typically, the contract will also allow them to employ others to complete the works and to use plant, tools, equipment, materials, temporary buildings and so on to do so. However, the employer must be certain of the insolvency first, and may seek evidence to confirm ~~that~~ fact.	+	Most contracts will allow employers to terminate the employment of the contractor in the event of contractor insolvency and to cease payment. Typically, the contract will also allow them to employ others to complete the works and to use plant, tools, equipment, materials, temporary buildings and so on to do so. However, the employer must be certain of the insolvency first, and may seek evidence to confirm the fact.

	This still leaves the employer having to find a new contractor and this can be time consuming and expensive, with other prospective contractors knowing that the employer is in a weak negotiating position. They client may also need consent from funding bodies to replace the contractor.		This still leaves the employer having to find a new contractor and this can be time consuming and expensive, with other prospective contractors knowing that the employer is in a weak negotiating position. They client may also need consent from funding bodies to replace the contractor.
Line 58:		Line 58:
	* Outstanding disputes.		* Outstanding disputes.

−	The situation is complicated by the prevalence of sub-contracting in the industry. The ~~employers~~ main contractual link to subcontractors is through the contractor, and this link is been broken by the insolvency. The employer may be protected to some extent by provisions such as collateral warranties and step in rights.	+	The situation is complicated by the prevalence of sub-contracting in the industry. The employer's main contractual link to subcontractors is through the contractor, and this link is been broken by the insolvency. The employer may be protected to some extent by provisions such as collateral warranties and step in rights.

	However, the complexity and extent of the supply chain means that the knock on effects of main contractor insolvency can be far reaching. This is exacerbated by the fact that late payment is rife, and so companies in the supply chain of the insolvent company might be owed very large sums of money that they may be unable to continue without.		However, the complexity and extent of the supply chain means that the knock on effects of main contractor insolvency can be far reaching. This is exacerbated by the fact that late payment is rife, and so companies in the supply chain of the insolvent company might be owed very large sums of money that they may be unable to continue without.