Insight · Reducing risk
The contractor above you
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 ·3 min read·Written by Unibuild
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
- 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.
- 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.
- 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.
- 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.
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.
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.
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