CARILLION – WHERE DO SUB-CONTRACTORS AND SUPPLIERS STAND?

On 15 January 2018, winding up orders were made against Carillion Plc and associated companies. The court appointed the Official Receiver as the liquidator, with PwC being appointed as special managers to assist the Official Receiver carry out his duties.

The Official Receiver and special managers have determined with customers which contracts they wish to continue purchasing.  The demise of Carillion attracted much press attention as a result of its relationship with Government.  Government contracts with Carillion included services for hospitals, schools, prisons and transport. Carillion delivered around 450 contracts with government, representing 38% of Carillion’s 2016 reported revenue.

Goods and services supplied with the Official Receiver’s agreement following the liquidation of Carillion will be paid in full.  However, sub-contractor and suppliers to Carillion who are owed monies will rank as unsecured creditors in the liquidation of Carillion and must lodge a claim in the liquidation.  Unsecured creditors will share equally any available assets or any proceeds from the sale of any of those assets, in proportion to the debts due to each creditor and will almost certainly not recover in full amounts due to them.  This will place considerable strain on the businesses of those sub-contractor and suppliers.

Further, such sub-contractors and suppliers will still be liable to make payment to their sub-sub-contractors and sub-suppliers with the result that they will be out of pocket if such sub-sub-contractors and sub-suppliers insist on payment.  Further, sub-contractors and suppliers will have the costs of wages and other costs to bear in the normal way.

The dust is still settling on the liquidation of Carillion and it remains to be seen whether there will be a barrage of claims for payment at the sub-sub-contractor and sub-supplier level and whether there will be an unfortunate ripple effect of insolvency down the contractual chain.

Any sub-contractors and/or suppliers concerned about their position should seek urgent advice as to their exposure to ensure that they are not trading whilst insolvent and to seek to protect their position.

If you would like to discuss your position or anything raised above, please contact Paul Donnelly on 0161 926 1507.