Liquidation in the construction industry
Insolvency practitioners deal with varied industries, including retail, manufacturing and the construction industry.
The commercial construction industry principally operates on a month-by-month basis with long term fixed contracts. For example, a plumbing contractor will specify a contract price for contracted works to be completed within a certain timeframe.
When such companies go into liquidation it is important that at all points cooperation with stakeholders is required to ensure that the effect of the liquidation is minimised while recoveries are maximised.
For example, $1,000,000 of plumbing commencing on 1 April 2025 and to be completed by 31 December 2025.
The contractors will invoice their customers monthly, and their subcontractors / suppliers will invoice them (or have monthly payment term), monthly.
When contractors are placed into liquidation, we are often left in a situation where the customers will refuse to pay their monthly claims for work undertaken by the company citing damages for breach of contract or unquantified disruption; they are worried that work originally quoted for $1,000,000, will now cost $1,200,000, leaving them out of pocket. The liquidated company’s suppliers and subcontractors are still owed money and will claim in the liquidation.
As we have canvassed previously, when dealing with construction companies, ensuring the company’s projects continue without delay or disruption are essential to maximising the recovery from payment claims.
Commercial Plumbing
Commercial Plumbing was a commercial plumbing contractor employing approximately 20 staff and contractors across several large projects. Unfortunately, the business ran into financial difficulties. We were appointed liquidators in October 2024.
Active projects
On appointment we entered interim arrangements in relation to three projects to continue trading. This resulted in the prior months payment claims being received by us as liquidators without any set-off was an exceptional outcome.
We finished one project during the liquidation and continued two additional projects for approximately one month, ensuring a timely and disruption free handover, minimising cost incurred by the customers because of the liquidation.
We also continued to trade and sold the company’s maintenance business as part of the liquidation in a separate business sale.
Assets
The physical assets of the company consisted of the following vehicles, tools and specialist equipment.
We worked with the directors of the company to identify and source buyers for the company’s specialist plumbing equipment, maximising its recoverable value.
Once the key assets had been realised, we engaged an auctioneer to sell the remaining assets at the company’s premises.
We also liaised with the staff working with them to sell the motor vehicles, this involved them obtaining warrant of fitness, cleaning and transporting the vehicles on our behalf. These actions maximised the sale price and minimised costs associated with sale.
Outcome
Through our actions we were able to ensure timely handovers with minimal disruption to the company’s active customers and secure payment of pre-liquidation payment claims. Sell the maintenance business. Maximise the sale value of vehicles and tools resulting in a significant distribution to the secured lenders and pay a full distribution to former employees.
