Insolvency in construction

Insolvency legislation

The main legislation which deals with insolvency is the Insolvency Act 1986 (IA 1986), the Insolvency Rules 2016, SI 2016/1024 and the Corporate Insolvency and Governance Act 2020 (CIGA 2020). Companies in financial difficulty may be subject to the following insolvency procedures:

1. •

   administration

2. •

   receivership

3. •

   liquidation (or winding up)

4. •

   a company voluntary arrangement (CVA)

5. •

   a moratorium

Administration

A company in administration still exists legally and can continue to trade. Administration is designed to rescue and restructure a company that has become insolvent. An administrator may be appointed either:

1. •

   out of court, by a qualifying floating charge holder or by the company or its directors, or

2. •

   by the court, on application by the company, its directors or one or more of its creditors

The objective of administration is to:

1. •

   rescue the company as a going concern

2. •

   achieve a better result for creditors than if the company were wound up, or

3. •

   realise property for the benefit of creditors

While the administration is ongoing, the company is protected from anybody enforcing any right over the company's assets. See Practice Note: Administration—an ...