The following Construction guidance note provides comprehensive and up to date legal information covering:
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This article appears as originally published in Construction Law on 1 June 2018 and is not maintained.
Anne Wright of Lawrence Stephens Solicitors says there are several vital steps that sub-contractors should take to protect themselves against main contractor insolvency. Ask if the main contract requires a retention before agreeing to one, she advises.
Financial checks: background checks on the main contractor pre and post contract
Keep up to date with accounts: monitor late or suspended payments and timing of pay less notices
Payment security: look for an advance payment bond and possible direct payment
Consider project bank accounts and escrow accounts
Question whether retentions are really necessary
'Contractor's assets insufficient to pay creditors' - 'Sub-contractors owed millions of pounds for work carried out prior to the firm's liquidation': such headlines are now horridly familiar.
Construction insolvencies account for up to 20% of corporate failures in the UK per annum. This is not new or peculiar to Carillion at a time when sterling pressures make supplies more expensive, margins squeezed to less than 2%, and tender races increasing as contractors chase volume of work.
How might a sub-contractor seek to protect itself from main contractor insolvency, which for many, would result in their own insolvency or bankruptcy?
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