The placing of Carillion into Compulsory Liquidation on the 15 January 2018 has come as a shock to many, with a lot of people believing that Carillion was too big to fail.
The key issue for me is not the liquidation of the company itself, or even the conduct of the company's directors, but rather the effect of the Liquidation on the wider business would.
Suppliers, customers and unsecured creditors have now been placed into a difficult situation.
The information in the public domain as to the likely return to creditors is scarce, but what is certain is that any dividend to unsecured creditors will be minimal, if anything at all!
So where does this place the unsecured creditors and the sub contractors who have done work for Carillion but who are now unlikely to be paid.
While the Government may pick up the bill for ongoing works, I think that it is highly unlikely that the Government will settle any debts for work that has already been done.
Any suppliers, sub-contractors and unsecured creditors will now be left with a black hole in their cashflows for the next six months.
Insolvency can have a snowball effect, and one only, needs to look at the demise of Rok, which caused many small business who provided services to that Company to have financial difficulties themselves, many of which were ultimately also placed into Liquidation.
However this does not necessarily need to be the case. A Company Voluntary Arrangement may be a solution to deal with any cashflow difficulties.
A Company Voluntary Arrangement, or CVA, is an insolvency mechanism whereby a company's debts can be paid over a five year period, thus assisting a company to get over its cashflow difficulties to enable it to continue to trade.
If you are a creditor of Carillion, and you will now be facing cashflow issues, you should take insolvency advice to see what assistance can be given to ease those cashflow issues and allow your company to survive and trade out of the situation.
If you would like some free insolvency advice to discuss your individual situation please telephone or email Chris Parkman on 01305 458 383 and email@example.com.