What should I do if contractor insolvency occurs?
In the event that the worst happens and contractor insolvency occurs, there are a number of steps which the employer should take immediately:
- Confirm that insolvency has actually occurred and the type of insolvency (for example liquidation or adjudication) – actions taken based on rumours can have adverse consequences
- Secure the site and carry out an audit of the plant, equipment and materials present – this may extend to changing the locks on site in order to prevent overzealous contractors and sub-contractors seeking to return and take what they see as their possessions. The building contract may contain a provision that these are the employer’s property, but they can be difficult to recover if they are not within the employer’s possession – possession is 9/10ths of the law!
- Ensure that there are adequate insurance and health and safety arrangements in place for the site – these would usually be dealt with by the contractor and therefore may no longer be in place, so alternative arrangements may be required
- Ensure that any further payments to the contractor are stopped pending a more detailed review
- Consider whether any off-site materials have already been paid for and can be secured. This can however be difficult in practice where the materials are not physically within the employer’s possession
In addition, there are also a number of further actions which the employer should consider in the slightly longer term:
- Investigate the options available and ascertain the cost of completing the works to assist in deciding how best to proceed
- Consider whether termination of the contractor’s employment under the building contract is required, and if so take the necessary steps in accordance with the building contract
- Consider whether there are any bonds or guarantees in place upon which the employer can rely, and if so assess their terms as to whether and how to make a claim
- Make arrangements to complete the works – as a general rule of thumb the cost of completing the works may increase by around 30% if it is necessary to get a replacement contractor
- Consider whether direct payment to subcontractors is possible or desirable
- Although we would say this(!) we would strongly recommend taking legal advice, as insolvency and its implications are complex and it is easy to inadvertently fall foul of the various different requirements
Related FAQs
CBILS is made available through the British Business Bank’s 40+ accredited lenders and partners, which are listed on their website (https://www.british-business-bank.co.uk/ourpartners/coronavirus-business-interruption-loan-scheme-cbils/accredited-lenders/).
Businesses should initially approach their own lender and only consider other lenders if they are unable to access the finance they need. Note, not every accredited lender can provide every type of finance listed.
Some banks/lenders are not included in the list of accredited lenders which appears to mean that they cannot provide support through the Scheme. We understand from the British Business Bank that further lenders are applying to be accredited but that this may take a little time to process. If the provider of your senior debt is not on the accredited list you should consider approaching the bank which provides your day to day account banking services.
If you wish or need to access the Scheme via an alternative funder the process may take longer as usual on-boarding and KYC processes will need to be undertaken.
The Competition and Markets Authority (CMA) has issued a number of guidance documents about the application of competition law rules during the coronavirus outbreak. In general, the competition law rules are being relaxed in very specific circumstances.
During the COVID-19 global pandemic, trials and hearings have been mostly conducted over Skype for Business and various other online platforms. Looking forward to the future, what we have experienced during the lock-down may continue and we believe will make litigation a more streamlined, user friendly experience for litigants.
One example of a regime which has been introduced is hybrid trials for lower value claims. Hybrid trials allow for parties and their witnesses to be linked into the court room by video link, whilst the judge and advocates are present in court. This makes it easier and frees up more time for witnesses, which would otherwise be spent in travel and waiting time, especially for those with other commitments.
With hybrid trials, clients still get a full legal experience and the judge will still apply normal legal principles during the trial. The procedure for the case is the same, both leading up to the trial or hearing and during the case itself; except without the need to physically attend court. It may also mean that there will be less of a backlog arising from the current crisis with cases continuing to be heard, allowing for matters to be listed earlier and a quicker outcome for the parties involved.
The shift to the use of online platforms may prove more practical for all those involved in legal matters. Interim hearings can be heard remotely resulting in a time and cost saving for litigants. Even for the final hearing only the legal representatives need to attend court – again resulting in time and cost savings for all concerned.
Employers had until 31 July 2020 to make any claims for claim periods up to 30 June 2020. That was the end of the old scheme.
From 1 July 2020, claim periods must start and end within the same calendar month and must be for at least 7 days unless you are claiming for the first few days or the last few days in a month.
You can only claim for a period of fewer than 7 days if the period you are claiming for includes either the first or last day of the calendar month, and you have already claimed for the period ending immediately before it.
For example, if an employee is furloughed for 7 days spanning a month. You can claim the last 3 in one month, and 4 from the next.
The crucial point is that you cannot make claims that cross calendar months.
The first time that you could make a claim for days in July 2020 was 1 July 2020. You could not claim for periods in July 2020 before this point.
Employees are generally permitted to take holidays during furlough. However, Government guidance has been updated to state that “Employees should not be placed on furlough for a period simply because they are on holiday for that period.” If a period of furlough happens to coincide with an employee’s holiday then you should ensure that there are business grounds to support furlough being used in that instance so that it isn’t just being used as a means to fund holiday utilisation.