My business is a sub-contractor to Carillion: what should I do?

26th January 2018

If you have not done so already, check your sub-contracts with Carillion to see what termination rights you may have as you will want stop incurring further debt unless it is proposed to transfer your sub-contract to a new entity.

It is important to remember that unless the contract says otherwise, insolvency does not give you an automatic right to terminate the contract.  You may have rights to suspend for non-payment but you have to give the correct notice.

Carillion’s client (for example a developer or other procurer of services) may have contractual rights to “step-in” to take over your sub-contract (for example under a collateral warranty or third party rights schedule).  The terms upon which they can step in and whether they are liable to pay outstanding debt, as opposed to paying for services provided going forward, will depend upon the terms of the collateral warranty.

If there are no express step-in rights in a collateral warranty or similar document, then you may be approached by the client to agree to a novation i.e. transfer of the sub-contract to either the client or a new main contractor.

Again, if you are asked to enter into a novation agreement, its terms need to be checked carefully, and in particular with regard to what obligations the incoming party has to pay any monies owed to you by Carillion.