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

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