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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

How do I make arrangements for end point assessments for apprentices?

Arrangements for end point assessments can be modified or rescheduled. End point assessment organisations should engage with External Quality Assurance Providers to agree arrangements for the end point assessments where face-to-face assessments are being modified. Where rescheduling is required due to Covid-19 issues and there is a specified time limit for the ESA post gateway, a further pause of 12 weeks is allowable. This should be recorded by the training provider in the ILR.

Do you have to reach agreement during collective consultation?

Although an employer is obliged to conduct consultation “with a view to reaching an agreement”, it is not required to actually agree to any counter proposals made by the employee representatives. Merely to consider them in good faith.

Unpaid leave and sabbaticals

Employees will be reluctant to take unpaid leave or a sabbatical but when faced with the alternative prospect of redundancy may give it some serious consideration. This would remove the cost of that employee from the employer’s business for an agreed period of time. This is an option which can be offered to employees but again, imposing it without agreement creates significant risk.

Due to the lockdown and government guidelines, my partner and I have moved in to the house I own. Is there anything I need to be worried about?

Where a couple is not married, they have limited rights in relation to each other’s assets and these mainly relate to rights over property assets. There is complex Trust law which governs whether or not your partner could claim an interest in your property and it generally relates to where someone has invested in renovations on the property or promises have been made. If this is something you are concerned about, you and your partner could enter in to a Cohabitation Agreement. These Agreements can set out various matters, including who will pay the bills and where each of you would live if you separated. Most importantly, they can record your intentions about who owns the property and exclude any rights your partner would have against your property.

The Media

The BBC

The national broadcaster’s collated content surrounding the Covid-19 pandemic:
https://www.bbc.co.uk/news/coronavirus

and with regards to business:
https://www.bbc.co.uk/news/business