What does Insolvency Loss Prevention leave us with if our main contractor goes bust anyway?
A loss limited to what the routine let build up, and the file for recovering it already in place.
Updated: . By Jack Butler-Kettle, Construction Claims Consultant.
The answer
Insolvency Loss Prevention does not stop a main contractor failing. It changes how much that main contractor owes you on the day it does. That decides most of what you lose, because an unsecured creditor usually gets back a few pence in the pound. By then you hold an exposure figure for every job and a ceiling for every main contractor. You have a diary that has kept applications and notices on time, and order terms that keep your unfixed materials yours until paid. Your credit controller reads a watchlist every month, and a suspension notice is ready for the day the law allows it. Those records are where Insolvency Claim starts. Your subcontract rights are already set out clause by clause, and the account is measured job by job. The materials on site are few, and still yours. Where a decision needs legal or insolvency advice, we say so and your solicitor takes it.
Example
Illustrative example. The scenario and figures are invented.
The facts
A steel fixing subcontractor has run the Insolvency Loss Prevention routine for 6 months on a job where the main contractor's payments have started to slip. Its ceiling for that main contractor is £70,000.
What happens
- The monthly watchlist shows two signs together: payments arriving later each cycle and a request to hold an invoice.
- Rebar deliveries are cut to what the gang fixes in a week, and the next application goes in on its due date.
- A sum passes its final date for payment unpaid with no Pay Less Notice, and the suspension notice that was ready is served.
- The main contractor enters administration 2 months later.
The position on the day
| Item | Amount |
|---|---|
| Ceiling for this main contractor | £70,000 |
| Owed on the day of the appointment | £48,000 |
The outcome
The subcontractor is owed £48,000, under its ceiling. The subcontract map, the statement of account and the materials list are already on file when Insolvency Claim is instructed.
To keep what a failing main contractor could owe you small before it fails, see our Insolvency Loss Prevention service.