The main contractor has gone bust. What happens to my money?

Start with the honest sentence, because everything else follows from it: money the main contractor owed you is now a claim in an insolvency, and unsecured claims in construction insolvencies rarely pay in full. The work now is about protecting what can still be protected, quickly.

The clause that comes back to life

Section 113 of the Construction Act bans pay-when-paid clauses, with one exception: insolvency of the third party upstream. A clause that was unenforceable for the whole job can start working on precisely the day the employer’s money stops reaching the main contractor. So read your subcontract this week, looking for conditional payment wording, because it decides whether some of what you are owed was ever going to survive this. Knowing early changes what you spend chasing.

The four moves of the first week

1. Stop increasing your exposure. Working on for a company in administration, on the promise it will sort itself out, is lending money to an insolvent estate. Check what your subcontract says about insolvency and termination before you demobilise, and put your position in writing to the administrator.

2. Deal with materials before they blur. Unfixed materials you still own under a retention of title clause are worth photographing, listing and claiming in writing immediately, because ownership on an insolvent site gets contested fast, and anything built in is part of the building and gone, the same fixtures rule as the lien that does not exist.

3. Put your claim in properly. The administrator will ask for your account: certified and unpaid, work done and not yet certified, retention held against you. Retention held by the main contractor is usually just another unsecured claim, unless it was genuinely held in trust, which is rare and worth checking rather than assuming.

4. Treat the direct-deal offer as a new contract. Employers often want the job finished and will approach subcontractors directly. That can be the best outcome available, on terms in writing: it is a new engagement for new work, and be explicit about whether anything is being paid towards the old debt, because by default it is not.

Who this page is about

This is a business-to-business situation, so the Construction Act machinery applies between you and the insolvent contractor in the ordinary way. The one statutory point that matters today is the section 113 exception above.

Where the information stops

Insolvency runs on process and deadlines that this page does not cover: proofs of debt, distributions, retention of title challenges, and the difference between administration and liquidation. When the sums are serious, an early hour with an insolvency practitioner or solicitor, this week rather than this quarter, is the best-value spend in the whole miserable episode.