My main contractor has gone into administration and owes me money
The appointment was announced this morning, two applications are unpaid, and our materials and gang are still on site.
Updated: . By Jack Butler-Kettle, Construction Claims Consultant.
What's happening?
Once an administrator is appointed, everything your main contractor owes you on that day becomes a debt in the administration. The administrator is the insolvency practitioner now running the company. The debt covers the two unpaid valuations, the work done since the last one and your retention. You are unlikely to see all of it. How much you keep depends more on the next few days than on the dividend, the share of each pound finally paid out.
Meanwhile the site keeps moving. Your materials may be built in or used by someone else. Your gang may keep working with nobody agreed to pay for it. A termination clause in your subcontract may not work the way it reads. Insolvency law limits a supplier's right to stop supplying a customer because it is insolvent. The angry email sent today will be read by the administrator. And later, the administrator will deduct any claims it has against you, such as defects, and pay a dividend only on what is left.
The solution
Check the appointment on the public record before anyone acts, and log the time of every call. Decide with your solicitor, on your subcontract's terms, whether your gang works tomorrow. Photograph and list everything of yours on site, and claim it from the administrator in writing before it is built in or used. Then build your account item by item, with the evidence for each.
Insolvency Claim runs those first days with you to a checklist. Then we build the account: the two valuations, the work since your last application and the retention. Each is valued after anything the administrator can deduct, and your claim is lodged in the form the process asks for. Our Handover Pack at the end shows what the gaps cost you, and Insolvency Loss Prevention closes them before the next job.
Example
Illustrative example. The scenario and figures are invented.
The facts
A mechanical subcontractor on a £1,400,000 school package hears at 9am that its main contractor has entered administration. Two valuations of £71,000 and £64,000 are unpaid. It has done £38,000 of work since the last application, and £42,000 of retention is held. There is also £19,000 of unfixed pipework and valves in the compound.
What happens
- The appointment is confirmed on the public record by 10:40, and the log is opened with the time of every call.
- The gang spends the rest of the day making the work safe. It then stands down until the administrator confirms in writing whether it wants the work continued, and who will pay.
- The materials are photographed and matched to delivery tickets, and the claim to them goes to the administrator that afternoon. The solicitor takes the questions on termination and on who owns the materials.
- The administrator confirms it will not continue the contract. It agrees that the subcontractor can collect the unfixed materials, which the subcontract's retention of title condition keeps as the subcontractor's until paid for.
- The account is built item by item: the two valuations, the work since the last application and the retention. The administrator's £12,000 claim for defects is deducted from it.
The account in figures
| Head | Amount |
|---|---|
| Two unpaid valuations | £135,000 |
| Work since the last application | £38,000 |
| Retention held | £42,000 |
| Defects set against the account | −£12,000 |
| Net claim lodged | £203,000 |
The outcome
The claim is lodged at £203,000 after the deduction, with evidence for every line. The £19,000 of materials comes back instead of being built in. The Handover Pack notes that the first valuation went unpaid past its final date for payment 5 weeks before the appointment. A suspension notice at that point could have stopped the debt growing.