When a subcontract ends or a contractor becomes insolvent
A stopped project, an ended subcontract and an insolvent contractor raise different questions. Establish which one you face before deciding what to do.
By Jack Butler-Kettle · Updated
Guidance for England and Wales. Check the contract, amendments and facts that apply to your job.
The short answer
Confirm the legal and contractual position, preserve records and identify urgent deadlines. Do not assume a rumour of insolvency ends your subcontract or authorises removal of materials. Get advice before an irreversible step.
Identify what has happened
Save the notice or announcement and record who issued it. Distinguish a suspension instruction, default notice, termination notice and formal insolvency appointment.
Companies House guidance explains different company procedures. Confirm the entity and process rather than relying on a trading name.
An unpaid invoice and formal insolvency are not the same thing. Your response depends on the process, contract and governing law.
Check before stopping or terminating
Identify the alleged breach, required notice, remedy period and service method. Treat a contested notice as urgent without accepting its allegations automatically.
Where applicable, section 112 of the Housing Grants, Construction and Regeneration Act 1996 concerns suspension for non-payment. Suspension and termination are different rights.
Insolvency can affect enforcement and contractual termination rights. Obtain legal advice before relying on an insolvency clause or taking possession of goods.
Preserve the commercial record
Record work completed, outstanding work, materials, plant, site condition and access arrangements. Keep photographs, delivery records and ownership documents.
Separate unpaid applications, retention, disputed changes and alleged deductions. Record payments received after the event against the correct items.
Check instructions from the authorised person before returning, removing equipment or incurring more cost. Deal with immediate safety duties appropriately.
Understand the creditor process
Identify the appointed office-holder and their instructions for submitting a claim. Keep copies of the evidence and correspondence supplied.
The Insolvency Service creditor guidance explains provable liabilities. Admission of a debt does not guarantee payment in full.
Different procedures and jurisdictions have different restrictions and priorities. Scotland and Northern Ireland require their applicable rules to be checked.
Example
Fictional example, not a client result. Figures are simplified to explain the point.
The facts
A roofing subcontractor hears that its main contractor has entered administration while £18,000 remains disputed or unpaid.
What happens
It verifies the company and appointment, then saves the administrator contact details.
It records installed work and separates its own hired equipment from materials whose ownership needs checking.
It prepares its account evidence and seeks advice on the subcontract before stopping, terminating or removing goods.
What this shows
The subcontractor has a documented position and identified decision points. The example predicts no distribution or recovery.