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What is the Liquidation Process Carillion is Currently Going Through?

Written by Michael Higgins | 30 January 2018 10:30:00 Z

On Monday 15th January 2018 the news broke that Carillion, the giant construction firm and government contractor, was going into liquidation. Unlike the process of administration, where the company in question is able to continue trading whilst viable parts of the business are sold off in an effort to ultimately stay afloat, liquidation means a company ceases trading immediately and steps are taken to raise as much money as possible  to settle its debts.

A liquidator is appointed to handle this process, and at this stage Price waterhouse Coopers LLP (PwC) have been appointed as Carillion’s liquidators. It is possible for Carillion’s creditors to have a meeting and vote to agree a different liquidator to take PwC’s position, but it is unlikely to change in this case. 

PwC should now inform all creditors about the insolvency and send them each a proof of debt form. If you are a creditor and you have not yet received this form to fill, it is important that you make contact with PwC to ensure you are listed as a creditor. The next stage of the process will be to go on to assess whether there are any assets ready for liquidation, and take action accordingly. You can visit the PwC website page here.

Liquidation Debt Payment Priority

If monies are realised from the sale of assets of the company, the funds will be released in accordance with a certain priority:

  1. The liquidator and the cost of their services.
  2. Secured creditors or creditors who have been granted security. This will include institutions such as banks, lenders and finance providers.
  3. Company employees can get in line to claim for payout only after the secured creditors have been paid, and these claims are subject to limits that the government has set in place.
  4. Unsecured creditors will consist of suppliers, landlords, contractors, clients due a refund and taxman.
  5. Shareholders are the last priority for payment in this situation.

Creditors will be deemed as unsecured unless they gain security by having a charge against the assets. Even if you have a County Court Judgment (CCJ), you will be deemed an unsecured creditor.

What happens with insolvency payout?

The above list outlines the order of priority in a typical liquidation. Unfortunately there is usually only enough money for just the secured creditors, and more often than not the remaining groups won’t get paid. If there is any money left for the unsecured creditors it is all placed into a creditor’s pot and shared out, but it is likely creditors will only receive a few pence for every £1 of debt.

The Guardian has written an excellent article outlining what the liquidation means for a variety of groups affected by Carillion’s demise.

In the case of Carillion, the government and the Pension Protection Fund (PPF) are stepping in to ensure the running of certain public service contracts and provide a safety net for pensions. However, most subcontractors will be left struggling with bad debt, and many individuals will be left without their jobs. It is expected that the fallout from this event is going to be felt in the industry for a long while.



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