Administrators of Carillion, the collapsed UK construction giant, have announced 60 of its 84 companies are unable to pay unsecured creditors.
Of the remaining Carillion firms, 23 are identified as having “potential” funds to pay suppliers, with creditors, who have no claims over specific assets, likely to receive only a fraction of their debts as an unsecured dividend.
The status of the parent company, however, remains “uncertain”, with creditors being urged to step forward for further discussions.
According to PwC, who is overseeing the administration, there will be no returns for shareholders.
In a joint update, with The Insolvency Service and Department for Work and Pensions, PwC said: “The schedule is based on current information and any outcome for creditors is dependent on the value of the assets realised, the costs of realisation and administration costs of the liquidation estates.
“Therefore, this schedule is subject to change and cannot be relied upon as guidance as to the actual outcome for creditors and shareholders.”
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Carillion collapsed in January 2018 owing close to £7 billion, with only £29 million in cash.
The company’s insolvency sent shockwaves through the industry, impacting more than 30,000 suppliers and subcontractors, and led to significant government and public sector projects – around 450 construction and service contracts – being thrown into uncertainty.
At the time, Carillion employed around 43,000 people, including 19,000 in the UK.
Rachel Reeves, then chairwoman of the Business, Energy, and Industrial Strategy (BEIS), called Carillion “notorious” for its late payments to subcontractors, with the significant strain on its cashflow contributing to its eventual downfall.
The Commercial Relations Board, an independent payment dispute mediator, raised concerns about late payments in 2013, and while improvements were made, issues persisted into 2017.
Following its collapse, former Carillion CEO Richard Howson, and finance directors, Richard Adam, and Zafar Iqbal Khan were disqualified from holding directorships, with Howson banned for eight years, Adam for 12-and-a-half years, and Khan 11 years.
The trio also faced hefty fines of £397,800, £318,000, and £154,400, respectively, for misleading financial practices that contributed to the company’s downfall.
The far-reaching consequences of the company’s financial practices led to calls for legislative reform, with the UK government introducing the “toughest late payment laws in the G7” this July, aimed at addressing these issues and preventing similar incidents in the construction industry.
The new legislation may provide future relief for suppliers facing late payments.
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