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Carillion – practical advice for affected businesses

At just before 7.00am on Monday 15 January 2018 following an urgent telephone hearing, a High Court Judge agreed to place six of the Carillion Group companies into compulsory liquidation and appoint the Official Receiver as Liquidator. At the same time, six partners of PwC were appointed as Special Managers to assist the Liquidators.

It had been expected that Carillion would go into Administration, so the announcement of the Liquidation came as a surprise to many. Administration can allow an insolvency business to continue trading with a view to rescuing it as a going concern. The fact that it went into Liquidation strongly suggests it had reached a point where there was no value remaining in the business and assets that could be salvaged.

Carillion operated a large number of public service contracts. Carillion’s Liquidation is likely to have meant that those contracts were automatically terminated, allowing them to be brought back into Government control to give it time to determine whether to nationalise those contracts or to retender them out to other public service providers.

The main concern has been on the effect of its private-sector suppliers and subcontractors, which were reportedly valued at over £950m. Some of those may well have previously had cash-flow issues given the reported 120-day payment terms they were being subject to. Now those suppliers and subcontractors will not be paid and face the possibility themselves of insolvency, although since Carillion’s demise, some banks have announced that they will make funds available to support businesses at risk.

In those circumstances, there are a number of practical steps a business should now be taking if they are affected by Carillion’s insolvency:

  1. Businesses should not adopt a wait-and-see attitude in the hope that lenders/suppliers/the Government will provide any short-term assistance but instead should take proactive steps to ascertain to what extent they will be affected.

  2. Directors should take steps to ascertain how their business is likely to be at risk, whether as a result of not receiving payment from Carillion directly or as a result of non-payment to another party up the contractual chain.

  3. Businesses should consider whether they can reduce their exposure, such as by calling on guarantees or bonds or by applying set-off if money is owed by their business to Carillion as well as the other way around.

  4. Businesses should ascertain whether they can absorb the reduction in cash flow or whether they need to take any action to compensate for that reduction, such as reducing their overheads.

  5. If money is owed directly or indirectly by Carillion, directors should keep a close watch on the value of their businesses assets, liabilities and cash flow. Directors should determine whether they are able to pay their creditors as they fall due.


  6. Directors are under a duty to consider the interests of the company’s creditors if they have concerns they cannot be paid. Should that be the case, directors should take legal advice to protect their position, as they could face claims to personally contribute to the assets of the company in the event of the insolvency of the company and/or directors’ disqualification proceedings if their conduct is found to have fallen short of what is expected.

  7. Furthermore, directors may have given personal guarantees to lenders and suppliers which will be called upon in the event of their company’s insolvency. That normally is an incentive in itself for directors to act take proactive steps to seek early legal advice.

  8. If Carillion’s failure means you have concerns regarding the ongoing trading of your business, Keystone Law’s various specialist teams can work with you and your business to explore all the options available to you that may result in some type of refinancing or restructuring of the business, sale or placing it into an insolvency procedure.


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This article is for general information purposes only and does not constitute legal or professional advice. It should not be used as a substitute for legal advice relating to your particular circumstances. Please note that the law may have changed since the date of this article.

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