What is the current guidance for court of protection hearings?

In the event that the contractor is displaying one or more of the above signs, then it is worth considering the following actions to protect the employer’s position as far as possible:

• Closely monitor the financial and on-site performance of the contractor in order to assess the likelihood and timing of potential insolvency
• Ensure all bonds, guarantees and collateral warranties have been obtained under the building contract, and if not take steps to obtain them immediately
• Consider the terms of any guarantees to ensure that the guarantor’s obligations are not inadvertently discharged
• Bonds may require adjudication to have been commenced (or even completed) prior to insolvency so as not to be stayed pursuant to insolvency laws
• Carry out an audit of the on-site plant, equipment and materials, and evidence this (for example with photographs and written records)
• Ensure that copies of all relevant documentation have been obtained, for example drawings, specifications and anything required to comply with CDM requirements. If not, take steps to obtain these
• Review the payment position under the building contract, including whether any over payments have been made to the contractor which should be reclaimed, what retention is held or has been released, whether any payment notices may be necessary, and whether there are rights of set-off which should be exercised
• Check whether the involvement of any third party is required, for example funders, landlords, tenants or purchasers who may have rights in relation to the building contract and how it is administered
• Review the terms of the building contract relating to contractor insolvency – hopefully the parties will be fully aware of the building contract terms and have been administering it correctly to date, but if it has been hiding in a draw then now would be a good time to dust it off and ensure familiarity with the relevant provisions!

In general. there is often a stick or twist decision.  If the employer chooses to financially support the contractor (for example by agreeing different payment arrangements), this may help to keep the contractor solvent and more likely to complete the project, but it also exposes the employer to greater risk if the approach is not successful.  Conversely, withholding payments  from the contractor may make insolvency a self-fulfilling prophecy.  The precise advantages and disadvantages of the approach will be dependent on the specific circumstances of each case.

Many will have worked collaboratively with their suppliers and customers to deal with the immediate public health crisis. This will have meant offering flexibility as to contractual arrangements, whether in delivery dates, volumes of goods or services supplied, or even in the specification of what has been delivered.

If this is the case, it is important that businesses now do their legal housekeeping and make sure they have a proper record of what has been agreed. Unfortunately, our experience shows that many legal disputes arise out of amendments to contracts, typically where the parties to the contract each have a different view about what exactly they agreed to change.

We would therefore advise businesses to review any amendments that they might have agreed either verbally, by email, or otherwise, and consider whether they need to be captured in a more formal way which will make clear exactly what has been agreed to be varied, and (where appropriate) how long that variation will remain in force.

It’s also important to remember that some contracts contain provisions that set out specific requirements about how amendments are to be made. For example, they might require that amendments are made in writing (rather than verbally). These “No Oral Modification” clauses are commonly found in commercial contracts, and the courts have recently shown that they are willing to enforce them.

Failing to deal with amendments in accordance with contractual requirements could therefore have a serious impact on businesses as they recover from the disruption caused by the lockdown. If they end up in dispute with a customer or supplier, a business could find that the contract has not actually been amended in the way that they think – potentially leading to legal costs and liabilities at the worst possible time.

• Integration:
  • Is the individual held out as being employed by the business by having a company email address, uniform, how would they introduce themselves to customers?
• Exclusivity:
  • Is the contractor restricted from working for other organisations without the consent of the end user client?
• Length of engagement:
  • Is the contractor engaged to work on a specific project for a defined period? Or are they engaged for an indefinite period with no reference to a specific task or project?
• Pay:
  • Are there regular fixed payments or is payment on completion of specific task or commission based? Is the contractor entitled to benefits or bonuses?
• Facilities:
  • Does the contractor provide their own equipment and materials to provide the services?
• Financial risk:
  • Is the contractor personally responsible for any loss arising from their work in performing the services? Will they have to rectify unsatisfactory work at their own time and expense? Will they have the opportunity to profit from the success of a project?

The Government assured parity for the self-employed but it has since accepted that this would be difficult to achieve. The Association of Independent Professionals and the Self-Employed (IPSE) has worked closely with the Government on implementing the current self-employment income support scheme. IPSE has confirmed that it will continue to work on helping to extend measures to all freelancers in need as a result of Covid-19.

The Government announced an extension to the Self-Employment Income Support Scheme from 1 November 2020.

Click here for details of what sort of things directors should consider if the business is insolvent .

There may be additional sources of funding available in addition to the funding made available to help pay the wages.

If you still have concerns that your business might not be able to survive you should take advice as soon as possible from our team of experts or an insolvency or restructuring practitioner. That doesn’t necessarily mean that the business is bound to fail but your advisers will be able to explore with you different ways to navigate through the current difficulties faced by the business and any restructuring/refinancing opportunities based on their extensive experience of helping companies that are facing financial problems. If ultimately saving the business in its current form is not possible, your advisors can help you ensure that you do everything you can to protect your employees and creditors whilst also ensuring that you comply with your duties as a director.