Insolvency in construction, part 1: Challenges for UK contractors supplying services to companies that enter insolvency

Geopolitical turmoil. Inflation. Brexit. A pandemic. Conditions were already complicated enough for contractors before the current spate of insolvencies among UK construction companies. In this episode, we explore the legal and commercial ramifications for contractors who supply services to companies that face insolvency.

Ashurst colleagues Tom Duncan, Ru-Woei Foong and Inga West discuss the meaning of “ipso facto” in an insolvency context and, in particular, UK laws which restrict a supplier of goods or services to a company from terminating supply when the company goes into insolvency. They also explain how and when a contractor can protect their position and pursue outstanding payments, and they discuss circumstances that could enable a supplier to terminate the contract.

The trio emphasise the importance of contractors engaging early with insolvency practitioners to clarify their position and weigh up their options. And they discuss the Building Safety Act and potential liability in relation to developers and their holding structures – a particularly acute challenge with older or more mature developments.

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The information provided is not intended to be a comprehensive review of all developments in the law and practice, or to cover all aspects of those referred to. Listeners should take legal advice before applying it to specific issues or transactions.