Insurance 19 January 2018

Carillion insolvency: A survivor’s guide if you’re part of the supply chain

Low Angle View Of Cranes against skyline in Shanghai, China.
Carillion is believed to owe around 800m in retention payments to suppliers and sub-contractors
In light of the recent Carillion insolvency, many suppliers may be wondering what to do if a major customer is liquidated.

Here, John Buchanan, of accountancy firm HW Fisher & Company, outlines some key considerations that can help reduce the impact on your business.

  1. Take charge

The faster you react, the more likely you will be able to manage the situation and lessen the impact on your business.

Contact the appointed insolvency practitioner as soon as possible to discover what their plans are for dealing with the area of the business you supply to.

It may be that the business is being marketed for sale and continuing to trade, or has already been sold to another company which provides the opportunity to supply to the purchasing company and maintain turnover.

If the business has ceased to trade you know that you have to deal with the loss of turnover as soon as possible.

  1. Advise the liquidator of any claim for retention of title?

Goods that you have supplied to the company with a valid retention of title clause, as part of the condition of supply and which are still held by the company, must either be returned to you or paid for if used by the insolvency practitioner for ongoing trading once you have made a valid claim.

Advise the insolvency practitioner that you are claiming retention of title and request that the goods you have supplied are set aside as soon as possible to ensure they are protected.

  1. Contact your credit insurer?

If you have taken out credit insurance, notify your insurer of the insolvency and confirm what steps you need to take to submit your claim and recoup your losses so that your claim can be processed as quickly as possible.

  1. Find out if your services are still required

Establish whether the business, or part of the business, you were supplying to is still being traded by the insolvency practitioner. If your services are still required, ensure that payment for ongoing services is guaranteed by the insolvency practitioner. If you are the only possible supplier for the services you supply, this is a good opportunity to negotiate the repayment of all amounts outstanding to your business.

If that’s not the case, then this is your chance to continue generating turnover in the short-term while the insolvency practitioner markets the business for sale. Ensure that the insolvency practitioner puts in writing that they will meet the payment for ongoing supplies.

If you are a utilities provider, you cannot make it a condition of ongoing supply that your outstanding payments are met but you can request an indemnity from the insolvency practitioner for ongoing services.

If the business is sold consider what terms you are willing to supply to the new company, especially if the business was sold to the former management.



The difference between insolvency, liquidation, bankruptcy and administration

There are a number of possible routes owners can take when their business can no longer pay its debts. Here, we look at the different options.


  1. Decide if you can weather the storm

Typically, you will need to write off the amounts owed to you by the insolvent company.

You should make a claim in the insolvency, however, the amount of the dividend is likely to be small and will not be available for a considerable amount of time, or there will be no dividend at all.

This will affect your cash flow and youll need to establish how it will impact your business quickly. Can you trade with the loss of revenue? Will you need additional finance? The sooner you act, the sooner the position can be resolved.

  1. Forecast future profit, loss and cash flow


Business Advice