Do I have to keep working after my main contractor goes into administration?
Not for nothing, but you may not be allowed to stop just because it is insolvent, so do not simply walk off.
Updated: . By Jack Butler-Kettle, Construction Claims Consultant.
The answer
Since 2020, insolvency rules have stopped many suppliers from ending a contract, or stopping supply, only because the customer has entered an insolvency process. The same rules stop suppliers insisting that the old debt is paid before they carry on. So a termination clause in your subcontract that is triggered by the main contractor's insolvency may not work as it reads. The rules are there to keep the company's supplies going. They do not mean you work for nothing after the appointment, and not being paid for new work is treated differently from the old debt. Exactly where the line falls on your job is a question for your solicitor on day one. The commercial steps do not wait. Record where the work stood on the day. Ask the administrator in writing whether it wants you to continue, and who will pay for work from now on. Keep the account for new work separate from the old one.
Example
Illustrative example. The scenario and figures are invented.
The facts
A steel erection subcontractor is halfway through a frame when its main contractor enters administration on a Tuesday, owing it £84,000. The administrator's team asks the gang to keep erecting while it looks for a buyer for the business.
What happens
- The same day, the subcontractor records where the frame stood, with dated photographs and the last signed-off grid lines.
- Its solicitor advises that the subcontract's insolvency termination clause is unlikely to be usable. The old debt also cannot be made a condition of carrying on.
- The subcontractor writes to the administrator asking whether it wants the work continued, and who will pay for work from the appointment onwards.
- The administrator confirms in writing that work from the appointment will be paid weekly, and a separate account is opened for it.
The outcome
The frame is finished over 3 weeks and paid weekly on the new account. The £84,000 owed at the appointment is claimed in the administration on its own, and never becomes the price of carrying on.
To have the decision on whether you keep working taken on your subcontract's terms and recorded before the next shift, see our Insolvency Claim service.