There has been much talk about the demise of Carillion since its failure and not all of it has been entirely helpful. So we thought it would be worthwhile to give some of the facts and hopefully some information that will be useful to the hundreds, if not thousands of suppliers affected.
What has happened to Carillion?
Firstly, the company is not in administration nor receivership as some have reported. Carillion (and its other entities) have gone into compulsory liquidation and this happened in the early hours of Monday morning.
Secondly PWC are not the liquidators. In a compulsory liquidation the Official Receiver, a civil servant and part of the Department of Business Enterprise and Environmental Strategy is automatically appointed as liquidator. The reality is that the Official Receiver’s office has neither the resources nor (and we hope they don’t mind us saying this) the expertise to manage something the size of Carillion. Therefore, the courts have instigated a rarely used process and appointed PWC as Special Managers of the companies allowing them to manage the businesses and deal with the contracts and employees during this period of upheaval.
What has happened to my contract with Carillion?
On the making of a compulsory winding up order any contracts the company held are automatically terminated, whether this is an employment contract or a utility supply. The reality appears to be, at least for now, that PWC are continuing to honour those contracts for ongoing work, not least to ensure that the infrastructure of this country doesn’t come to an end.
Please note though that by doing so PWC are not adopting the contracts and will take no responsibility for the completion of it. This is merely a holding position. As a consequence if you are being asked by PWC to continue working make sure that you have been provided clear written statements on what you will be paid for and when. Note though they will not be honouring historic liabilities of the company (see below). That said they have, apparently, reassured staff that they will continue to be paid if they come into work this week.
It appears to be expected that many of the contracts that Carillion holds with the Government for the delivery of projects or infrastructure will be passed on to other parties for completion (politically this is a must) and whilst that provides some expectation to sub-contractors that they may still be needed there is no guarantee that the newly appointed party will want to continue in the same guise as Carillion did.
All of the above means that for any sub-contractor involved in a Carillion project the future revenue expectations are very uncertain and businesses in this situation should be looking carefully at outcome scenarios to see how they will fare if their contract(s) are not continued.
Will I get paid by Carillion?
According to press reports the amount of debt in Carillion is huge and the fact that they have chosen liquidation rather than a rescue procedure like administration indicates that the expectation of a return to creditors is very low. In fact PWC have been quite clear that they don’t expect there to be anything for shareholders. It remains to be seen whether once the costs of liquidation and secured bank lending has been dealt with what, if anything, will be available for the general body of suppliers and other creditors.
If you are owed money by Carillion you should keep an eye on PWCs website to keep you up to date on the progress of the liquidation. You should also consider registering your debt with the Official Receiver, there is guidance on this here.
More practically you need to consider your terms and conditions and whether this gives you any extra leverage. If you have goods on one of the Carillion sites and your terms and conditions include a retention of title clause you should notify both the Official Receiver and PWC straight away and ask to attend site to identify and uplift your equipment.
Furthermore do your terms allow you to withhold any licence or final approval without payment? As always these commercial aspects should not be ignored just because the company is in liquidation.
How long will the liquidation of Carillion take?
Whilst this is not as complex as the failure of Lehman Brothers (which is still ongoing) you can still expect the liquidation to take years to come to a conclusion as it was an immense business and PWC will need a great deal of time to finalise matters.
If you are affected by the liquidation of Carillion and need or want any help or advice with any of these aspects do get in touch with us. We have a wealth of experience in dealing with liquidations and seeking the right advice early can make a huge difference to the outcome.