The compulsory liquidation of Carillion is likely to have a wide ranging effect on the construction industry in the UK. The impact may well be felt by other contractors, sub-contractors and suppliers as well as engaged professionals such as architects, engineers and project managers. The insolvency may give rise to calls on bonds or guarantees and affect insurance arrangements.
In this bulletin we summarise what has happened and offer immediate advice.
PWC UK has updated their website (advising that the following companies are in compulsory liquidation):
- Carillion Plc
- Carillion Construction Limited
- Carillion Services Limited
- Planned Maintenance Engineering Limited
- Carillion Integrated Services Limited
- Carillion Services 2006 Limited
Whilst the official receiver has been appointed as liquidator by the court the official receiver has appointed six of PWC’s partners as special managers of these companies.
The PWC website link contains advice to those parties engaged with the Carillion companies. They state 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 as to applicability for any Carillion projects in which you are involved.
At this early stage we recommend that if you are engaged with the Carillion Group or involved in a project where Carillion has a role that you assemble your contract documentation for early review. In previous instances of main contractor insolvency, parties have applied for injunctions to protect their rights in unfixed materials and designs and you should be in a position to respond quickly to any correspondence received or claims made. You should also review whether any materials in which you retain title are about to become fixed to land or buildings which may adversely affect your rights.
Examples of issues to be reviewed include the following:
- Employers/consultants and developers should review their rights in relation to suspension & termination; payment rights including rights following the service of pay less notices; as well as checking for step-in rights in relation to key subcontracts which may be in collateral warranties. Vesting rights in unfixed materials should be reviewed.
- Subcontractors and consultants should check their obligations and rights in relation to payment; any notices that have to be given to employers prior to suspension and termination of the subcontract; suspension and termination rights generally and rights of retention in relation to unfixed goods and materials both on and off site (including materials at the premises of assemblers).
- Consultants and subcontractors carrying out design should review the intellectual property rights in their design works (including materials delivered electronically and associated software) and whether they have the right to withhold the use of their designs in the event of non-payment.