Insolvency continues to plague construction supply chains across the UK, causing widespread financial distress and disruption not only for businesses and their employees, but also for those they work with and the projects they work on.

Monitoring site activity and your trade partners for signs of distress has become an essential part of project management – as has the need for collaboration across the supply chain, and early action to support business partners and avoid project disruption. (You can read our checklist on how to spot the warning signs of insolvency in the supply chain here.)

Unfortunately, many in the industry will know from experience when a trade partner is struggling, but what about when insolvency does occur? What procedures are triggered and what, for example, is the difference between administration and liquidation?

In this briefing, we explain the most common, formal restructuring and insolvency processes in England: administration and liquidation (or "winding-up"). We also explain some insolvency issues of interest to those dealing with a counterparty in an insolvency process including: (i) communication between the liquidator/administrator and creditors; (ii) how creditors claim against a counterparty in administration/liquidation; and (iii) what is the pari passu principle (which deals with the order in which creditors are paid). Finally, we provide some practical action steps for those managing construction projects when one party is in financial difficulty.

Click here to access the full note within which you will be able to link to content on the following topics:

• Insolvency: some basics
• Administration
• Liquidation (or "winding-up")
• Communication between the liquidator/administrator and creditors
• What is the pari passu principle and in what order are creditors paid?
• Protecting companies in financial distress (the Corporate Insolvency and Governance Act 2020)
• Other insolvency processes
• Practical action for those managing construction projects when one party is insolvent

For further information and guidance, please get in touch with one of the key contacts.

For tips on how to identify the warning signs of insolvency in the supply chain, click here.