Construction insolvency—how to spot problems and how to protect yourself—contractors
Produced in partnership with CMS
Construction insolvency—how to spot problems and how to protect yourself—contractors

The following Construction guidance note Produced in partnership with CMS provides comprehensive and up to date legal information covering:

  • Construction insolvency—how to spot problems and how to protect yourself—contractors
  • Spotting the early symptoms of employer insolvency
  • Contractor methods of protecting itself in advance
  • Security package
  • Practical and legal concerns upon termination

Spotting the early symptoms of employer insolvency

  1. most importantly, a contractor needs to keep alert to the employer's financial status

  2. the contractor should take heed of ongoing rumours about the employer's financial position (either in the press or by word of mouth)

  3. look out for official announcements to shareholders/the stock market (for example, profit warnings)

  4. note any surprising or uncommercial omissions from the project made by the employer

  5. keep aware of the employer's non-payment or late payment of other parties on this project, or on other projects being carried out by the employer

  6. clearly, if the employer suspends work on the scheme without any adequate explanation or without commercial rationale, this may be a sign that the employer is unwilling to finance further work

  7. confirm suspicions by carrying out a Dun & Bradstreet search/report, which should disclose, for example, any unsatisfied court judgments against the employer

If the employer is insolvent, see Checklist: Contractor steps to take if employer becomes insolvent—checklist.

Contractor methods of protecting itself in advance

There are various ways in which a contractor can protect itself in advance against the risk of an employer becoming insolvent during the course of a project. Other than the specific items going towards the security package which a contractor might wish to see put in place (see below)