Insolvency – News and Legal Updates, March 2021

In this bulletin, we focus on some interesting legal developments affecting the construction sector - particularly the developing authorities regarding adjudication and set off in both administration and liquidation, and the impact to industry suppliers with the introduction of the VAT reverse charge on construction services. Our expert Construction team are experienced in advising office holders - alongside our Restructuring & Insolvency and other specialist teams - on options and strategies when faced with disputes relating to construction contracts.

Court enforces adjudicator’s decision in favour of an insolvent party

The case of Styles & Wood Ltd v GE CIF Trustees [2020] EWHC 2694 (TCC) is one of the first cases, post last year's Supreme Court judgment in Bresco v Lonsdale, in which the court enforced an adjudicator’s decision in favour of an insolvent party. The court considered whether undertakings to ringfence the award proceeds together with ATE insurance constituted sufficient security so as not to deprive the Responding Party of a potential set off. Patrick Blake and Lianne Edwards in our Construction team together with Katie Farmer of our Restructuring & Insolvency team consider the practical implications of the decision, which will be of particular interest to Insolvency Practitioners considering how they can deploy this cost effective ADR mechanism effectively in the right circumstances.

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VAT reverse charge on construction services

VAT changes in the construction industry came into force on 1 March 2021 and are expected to have a considerable impact on construction suppliers who will not be receiving VAT they might otherwise have used as working capital - safeguarding HMRC but putting affected suppliers (particularly smaller suppliers) under more cashflow pressure than ever. Angus Bauer in our Tax team sets out the changes, how they apply and the exceptions.

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Claiming liquidated damages post termination

In the recent case of PBS Energo A.S v Bester Generacion UK Ltd & Anor [2020] EWHC 223 (TCC) the court dealt with, amongst other things, whether liquidated damages could be claimed following a termination for repudiatory breach before the works had been completed. Lianne Edwards and Chloe Wood in our Construction Team comment on the case as an example of the importance of getting termination right.

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Extension of restriction on winding-up petitions and wrongful trading

The temporary restriction on winding-up petitions contained in the Corporate Insolvency and Governance Act 2020 (CIGA) and the temporary suspension of wrongful trading have been further extended to 30 June 2021. Read more for a reminder on the requirements for presenting petitions during the restricted period. The Government has also extended other support measures such as the furlough scheme, which is to continue until September 2021 and the ban on evictions which has been extended until 30 June 2021.

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