Carillion insolvency: the initial situation

Carillion, the troubled construction firm, has entered insolvency proceedings following failed talks over the weekend between the company, its lenders and the government.

The following companies have been placed into compulsory liquidation this morning, with the Official Receiver as liquidator:

• Carillion Plc
• Carillion Construction Limited
• Construction Services Limited
• Planned Maintenance Engineering Limited
• Carillion Integrated Services Limited
• Carillion Services 2006 Limited

We are monitoring the situation in case any other Carillion group companies are placed into an insolvency process.

The insolvency of a group with such breadth of operations is rare.  Carillion’s operations across the public sector are significant and its insolvency will cause disruption with forecast knock-on effects for sub-contractors, suppliers etc.

The choice of liquidation as the insolvency procedure is also unusual where the companies continue to trade.  However, the circumstances of this insolvency are exceptional and that has, and will, likely drive the choices made in it

Insolvency practitioners from PwC have been appointed as special managers to support the Official Receiver (a civil servant) as liquidator.  Ultimately, the special managers’ powers are defined by the court order appointing them.  We have not yet seen a copy of this but would expect it to be extensive.

PwC has set up dedicated web-pages to provide further information about the liquidations, which can be read here. Those pages advise currently that the companies are continuing to trade and we can expect further developments as the situation unfolds.

The PwC website states that: “The Official Receiver’s priority is to ensure the continuity of public services while securing the best outcome for creditors. Unless told otherwise, all employees, agents and subcontractors are being asked to continue to work as normal and they will be paid for the work they do during the liquidations” and “…we are encouraging all parties to contact and engage with the Companies in the normal way“.

Further guidance is also available on the government website here.

It appears from news reports that the government intends to provide funding for certain on-going public sector contracts.  In the coming days, therefore, we expect to see a different approach being adopted between projects and contracts with a public sector angle and those which are purely private sector, with government support for the latter being withdrawn.

The insolvency of Carillion will have repercussions for a wide range of stakeholders, including suppliers, landlords, employees and pensioners. Any member of the team below can assist if your business is or may be affected by the Carillion situation.