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Insight · Reducing risk

The contractor above you
has gone into administration.

What to do in the first seven days, where you rank, and the three things worth securing before anybody tells you to stop.

Published ·Updated ·3 min read·Written by

Steel reinforcement being fixed in a deep excavation

Act in the first week. Secure any plant, materials and tools of yours on site, stop work in a way that protects your position rather than damages it, register your claim with the administrator, tell your insurer and your own subcontractors, and gather every application, notice and record while people are still answering the phone.

The first seven days decide most of it

Almost everything a subcontractor can influence after a main contractor fails happens immediately, and most of it is practical rather than legal. Weeks later the questions are about pence in the pound and the answer is largely fixed. In the first week you can still get your equipment off site, establish what you are owed with evidence attached, and avoid making your position worse.

The instinct is to write letters. The more useful instinct is to send a van.

What to secure, and in what order

  1. Your plant, tools and unfixed materials. Anything of yours that is physically on site. Photograph it, list it, and remove it if you can lawfully do so. Once an administrator takes control, recovering your own property becomes a process rather than a phone call.
  2. Materials you have supplied but not been paid for. Where your terms include retention of title and the materials are identifiable and not yet fixed into the works, there may be a claim. Once fixed, it is generally gone.
  3. Your records. Applications, notices, instructions, signed dayworks, site diaries, correspondence. Not because they are at risk, but because you will need them assembled quickly and the people who could confirm anything are about to disperse.
  4. Hired plant that is on the job in your name. If you hired it, you are liable for it whoever it was working for. Off-hire it or move it.

Nobody recovers more by writing a better letter in week three. They recover more by having got their kit and their evidence out in week one.

Where you rank

Ordinary trade creditors, which is what a subcontractor usually is, rank behind secured creditors and behind preferential claims. Realistically that means a distribution measured in pence rather than pounds, and often nothing at all.

Two things change that picture, and both are worth checking rather than assuming. Whether a project bank account was in place, which ring-fences money for the supply chain on the contracts that use one. And whether anybody up the chain gave a parent company guarantee or a bond that responds.

Retention, stated plainly

Retention is not protected unless your contract says it is held in trust, and most subcontracts do not. Where it is not, it has been working capital in the failed business and you are an unsecured creditor for it like everybody else.

That is worth knowing before you need to know it, because it is an argument to have at the point of signing rather than at the point of collapse. It is covered in retention, and the money that goes missing.

Whether to keep working

Do not decide this on the phone with somebody who wants you to continue.

An administrator may ask you to carry on, and may be able to pay for work done from the date of appointment as an expense of the administration. That can be a reasonable arrangement. What it must be is in writing, from the administrator, before you do the work, and clear about what happens to the money you were already owed, which is a separate and usually much worse conversation.

Continuing on a verbal assurance, on the basis that a new contractor will be appointed and it will all be sorted out, is how firms turn one bad debt into two.

Where to start, on Monday

If it has just happened: list what is yours on that site and go and get it, today. Then assemble the claim while the records are fresh, and register it with the administrator as soon as their details are published.

If it has not happened to you yet, the useful version of this article is the previous one. Run the twenty minute check in credit checking the firm above you on your largest client, and look at how much of your turnover sits with them.

Where this touches the platform

Unibuild holds the outstanding value against each client, bucketed by age and by the manager responsible, alongside the applications behind it and the retention withheld on each job. It also holds the plant register and the delivery records, which is what the first week of an administration actually turns on: proving what on their site is yours. It answers the question that matters in that first week, which is what you are owed and what you can evidence, without two days of digging.

Cost control Applications for payment Assets and inventory Documents and certificates

Sources

Checked against the source rather than against commentary. Where a schedule, a rate or a threshold is definitive on a government site, read it there.

Asked most often

The follow-up questions.

Checking a contractor before it gets to this is in credit checking the firm above you.

What should I do first if a main contractor goes into administration?
Secure anything of yours physically on site: plant, tools and unfixed materials, photographed and listed. Off-hire or move any plant hired in your name, because you remain liable for it. Then assemble your applications, notices, instructions and records while people are still contactable, register your claim with the administrator, and tell your insurer and your own subcontractors.
Will I get paid if a main contractor goes bust?
Usually very little. An ordinary trade creditor ranks behind secured and preferential claims, so distributions are typically measured in pence in the pound and often nothing. Two things can change that and are worth checking: whether a project bank account was in place, and whether any parent company guarantee or bond responds.
Should I submit a claim to the administrator?
Yes, promptly and with the paperwork attached. Submit the proof of debt with applications, certificates, statements and correspondence supporting the figure. It costs little and it is the only route to any dividend there may be. Be realistic about the outcome, because unsecured creditors in construction insolvencies typically recover a small fraction, and sometimes nothing. Submitting is still worth the hour it takes.
Is retention protected if the contractor becomes insolvent?
Only where the contract states it is held in trust, and most subcontracts do not. Where it is not held in trust it has been working capital inside the failed business, and you rank as an unsecured creditor for it like any other debt. That is a point to negotiate at signing rather than discover at collapse.
Can I take my materials back?
Possibly, where your terms include retention of title, the materials are identifiable, and they have not yet been fixed into the works. Once materials are incorporated into the building the claim is generally lost. Unfixed materials still in your possession or clearly identifiable on site are the realistic case.
Should I keep working if the administrator asks me to?
Only on written terms from the administrator, agreed before you do the work, and only if you are clear that pre-appointment debt is a separate matter. Work done after appointment may be payable as an expense of the administration, which can be reasonable. Continuing on a verbal assurance is how one bad debt becomes two.
Can the employer pay me directly if the contractor is insolvent?
Only where something permits it, and that is the thing to look for early. Some contracts contain direct payment provisions, some employers hold a collateral warranty with step-in rights, and some will pay to keep a critical package moving. None of it is automatic and an administrator may challenge payments that prefer one creditor. Ask the question in the first week, while the employer still needs the work finished.
Can I still adjudicate against a company in administration?
Adjudication against a company in administration generally requires the administrator's consent or the court's permission, because of the statutory moratorium. Even where it proceeds, enforcement against an insolvent company is usually pointless. The better question is whether anybody else is liable: a parent company guarantee, a performance bond, or a direct payment route from the employer. Those are worth more than a decision against an empty company.
What is the difference between administration and liquidation?
Administration is a procedure aimed at rescuing the company or getting a better result for creditors than winding up would, and trading sometimes continues. Liquidation is the end: assets are realised and the company is dissolved. For a subcontractor the practical difference is whether there is any prospect of the job continuing and of future work being paid for. In both, sums owed before the appointment are usually unsecured.
How do I protect myself before a contractor becomes insolvent?
Keep the exposure small and the paperwork current. Apply on time every month, chase certificates rather than letting them slide, keep retention visible in your own ledger, and stop extending credit when payment behaviour changes. Ownership of materials until payment helps only if the goods are identifiable and still yours. The protection that works is having less money out there when it happens, and that is decided months before.
Next step

Know your exposure before you need to.

The first week decides most of what you recover, and it is a bad week to start working out what you are owed and what on their site is still yours.

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