0370 270 6000

already registered?

Please sign in with your existing account details.

need to register?

Register to access exclusive content, sign up to receive our updates and personalise your experience on brownejacobson.com.

Privacy statement - Terms and conditions

issues to consider if you are affected by the collapse of Carillion

19 January 2018

This article is taken from January's public matters newsletter. Click here to view more articles from this issue.


On Monday 15 January 2018, the High Court appointed the Official Receiver as liquidator of Carillion plc and various other group companies (Carillion Construction Limited, Carillion Services Limited, Planned Maintenance Engineering Limited, Carillion Integrated Services Limited and Carillion Services 2006 Limited) on the petition of the company’s directors. The Official Receiver’s priority at this time is to ensure the operational continuity of public services while securing the best outcome for creditors.  

The collapse of Carillion is predicted to have considerable knock on effects for the industry. Concerns have been raised relating to the ongoing delivery of services and the collapses impact on the operation of hospitals, schools, and highways both in the immediate future and longer term. In the short-term, the Government are providing funding to allow Carillion’s public sector work to continue, ensuring subcontractors on public sector projects are paid. However, government support for small firms involved in purely private sector deals was very short lived. Therefore, the collapse could have detrimental domino effect on smaller companies in the supply chain that will join the queue of creditors. When a firm goes into liquidation, creditors are paid according to a legal hierarchy with secured debts paid first, then senior creditors, followed by junior creditors, with shareholders at the bottom.

There will be a period of uncertainty for those who contract (directly or indirectly through special purpose vehicles (SPVs)) with Carillion in both the private and public sectors concerning current and future projects. For those who may be affected the following issues should be considered:

  • consider what your contractual relationship is, is it a direct one or are they part of the supply chain if the relationship is not direct then make contact with your principal contractor to work through what their proposals are and what your rights are
  • review your contract(s) in particular look at rights to suspend or terminate on the grounds of insolvency and performance failure
  • understand the impact the insolvency will have on any funding arrangements particularly where they are part of a consortium delivering private finance initiative (PFI) schemes or large infrastructure projects 
  • you will need to consider the impact of the Public Procurement Regulations 2015 in relation to the replacement of Carillion or indeed where the liquidator endeavours to transfer your contract to another provider
  • consider whether this impacts on your insurance requirements in particular if Carillion were responsible for insuring the assets under a PFI scheme (perhaps as part of their corporate policy) 
  • where Carillion have taken a transfer of staff who are in the local government pension scheme check the position of admission. If they have given a parent company guarantee rather than a bond then this may have little or no worth now
  • also check where you are with any other forms of security for performance which may have been given
  • check collateral warranties are in place from relevant consultants and subcontractors and that you have the documents in your possession 
  • audit what work has been done to date and what has been paid for both under and over payments should be clarified.

The official receiver and special managers will provide further clarity on the obligations on Carillion and contracting parties. In the meantime, where Carillion is the facility management contractor on a PFI agreement it is critical that the SPV commences the management of the contract and it is the SPV’s responsibility to ensuring the continuation of services. All companies affected should continue to trade and, unless informed otherwise, all employees, agents and subcontractors are being asked to continue to work as normal and told that they will be paid for the work they do during the liquidations (i.e. from 15 January 2018 onwards). The companies will continue to operate from their present locations and rent accruing during the liquidation will be paid as an expense from company assets. It is too early to say how long these arrangements will remain in place but PwC will be leading discussions with all relevant parties including Carillion’s customers, suppliers and landlords to determine ongoing arrangements.

PwC have been appointed as special managers, they will have all the same powers as if they had been appointed as liquidators themselves and, crucially, they have the manpower and experience to manage a liquidation of this size. All parties are being encouraged to engage with their usual contacts at Carillion unless the matter requires urgent attention in which case PwC have set up designated email accounts in order to answer questions and minimise disruption. Further information can be found at https://www.pwc.co.uk/carillion.

We can assist you if you need more analysis of your legal position in light of Carillion’s liquidation and can help you to plan your next steps in the wake of these developments.

Receive our latest government sector news

Choose the way you want to keep up to date with our latest updates and insights. Sign up to our monthly newsletter or join the conversation with our team on LinkedIn.

Sign up to receive updates >

Follow our LinkedIn showcase page >

<>

training and events

3Dec

Dynamic workforces: Workforce wonders - unlocking the secrets to a healthy, happy team Online event

Join us for our two-part dynamic workforces webinar series. In part one, we will look at life pre-Covid and reflect upon the typical workforce dynamics at play – productivity, stress, flexibility, wellbeing. Have these things improved during the pandemic, and how have we adapted to ensure that our people are resilient, ambitious and happy?

View event

8Dec

EdCon 2020

We’re delighted to invite you to join us at EdCon 2020 - Browne Jacobson’s first virtual conference for schools and academy trusts.Taking place over three days this December, EdCon 2020 will provide you with inspirational ideas, up-to-date advice and guidance and networking opportunities with one key purpose: creating great places to learn and work.

View event

focus on...

Legal updates

Public matters - November 2020

This month includes updates on conservation, judicial review, re-organisation, procurement and social value.

View

Legal updates

The Government’s proposes consultation on Environmental Impact Assessment

Whether there will be a weakening of the regime or not, it seems clear that the government intends to facilitate and simplify the EIA process.

View

Legal updates

Conservation newsletter - November 2020

Covering the latest conservation law updates including legislation and case law.

View

Legal updates

Pushing water uphill? Water Quality and the 25 Year Environment Plan

The government has outlined an ambitious target for improving the quality of water, and based on its own progress report and the Environment Agency’s results, it faces an increasingly uphill challenge to meet these goals.

View

The content on this page is provided for the purposes of general interest and information. It contains only brief summaries of aspects of the subject matter and does not provide comprehensive statements of the law. It does not constitute legal advice and does not provide a substitute for it.

Peter Ware

Peter Ware

Partner and Head of Government Sector

View profile

mailing list sign up



Select which mailings you would like to receive from us.

Sign up