Guide to insolvency in the construction industry

Produced in partnership with Gurbinder Grewal of Dentons , Ian Fox of Dentons and Michael Wright of Dentons
Practice notes

Guide to insolvency in the construction industry

Produced in partnership with Gurbinder Grewal of Dentons , Ian Fox of Dentons and Michael Wright of Dentons

Practice notes
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This Practice Note considers common issues that may arise out of Insolvency in the construction industry. It considers the effect and relevance of adjudication as a recovery method where insolvency may be imminent, and contains some practical tips on steps that can be taken in the event of a party’s insolvency.

This Practice Note contains general tips and advice and, as such, will not be applicable to every insolvency situation experienced in a construction context. This Practice Note should be considered carefully alongside the relevant facts of each case.

Introduction to the construction industry and construction Procurement

There are often a large number of participants with different roles on any one construction project. A non-exhaustive list of those participants is set out below:

  1. employer—the person or entity that wants the construction project to go ahead and commissions other professionals to carry out the work. The employer can be a public or private-sector entity and is also often called ‘the client’

  2. architect—usually

Gurbinder Grewal
Gurbinder Grewal

Gurbinder is a partner at Dentons UKMEA LLP, focusing on resolving contentious construction and engineering disputes through arbitration, adjudication, litigation or alternative dispute resolution. He typically acts for housebuilders, employers, main contractors and subcontractors in a wide range of sectors in construction and engineering disputes relating to payment, defects, claims for variations, extensions of time, loss and expense, and professional negligence.

Gurbinder is also experienced in acting as a 'project counsel' on live construction and engineering projects either domestically or internationally, assisting clients or contractors in managing claims and avoiding disputes.

Ian Fox
Ian Fox

Ian is a partner in the Restructuring, Insolvency and Bankruptcy practice, specialising in all areas of contentious insolvency work (including major commercial litigation). He also has significant experience in restructuring and non-contentious insolvency work and has advised insolvency practitioners, lenders, corporates and directors in relation to insolvency issues in sectors including energy, real estate, leisure, retail, media and sport. He has undertaken secondments with the restructuring teams of two of our major banking clients, gaining experience in all areas of their businesses.

Michael Wright
Michael Wright

Solicitor, Dentons


Michael specialises in the resolution and management of construction-based disputes. He has experience of formal litigation in the Technology and Construction Court, as well as various forms of alternative dispute resolution, including adjudication, mediation and international arbitration. Examples of Michael's experience include those set out below.

  • Advising a joint venture main contractor in a US$142 million ICC arbitration relating to variations, delay and breach of contract in respect of the construction of a major new transport link in Doha.
  • Advising a joint venture main contractor in a £300 million arbitration regarding the design and construction of a major airport in the Middle East.
  • Advising a well-known national housebuilder on a high-profile dispute with one of its customers, where the total value of the dispute exceeded £1 million.
  • Advising a well-known national housebuilder in respect of a TCC dispute with more than 40 homeowners, in relation to defects arising in the homeowners' properties.

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Jurisdiction(s):
United Kingdom
Key definition:
Insolvency definition
What does Insolvency mean?

This can be defined by two alternative tests (Insolvency Act 1986, s 123):

cash flow test: a company is solvent if it can pay its debts as they fall due, no matter what the state of its balance sheet (Re Patrick & Lyon Ltd [1933] Ch 786);

• balance sheet test: a company which can pay its debts as they fall due may be insolvent if, according to its balance sheet, liabilities (including contingent liabilities) exceed assets.

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