157. The Minister for the Cabinet Office, the Rt Hon David Lidington MP, told the Liaison Committee that, in the absence of a Government bailout, there were only two options for the company:
• a "managed and orderly" liquidation supported by the Official Receiver, part of the Government's Insolvency Service; or
• a "disorderly liquidation" that would have seen mass redundancies, contracts terminated and the potential loss of public services.452
Sarah Albon, Chief Executive of the Insolvency Service told us that private insolvency practitioners were unwilling to take on the administration because there was not "certainty that there was enough money left in the company to pay their costs".453 At 6.40am on 15 January 2018, the High Court granted a winding-up order for Carillion plc and five subsidiaries,454 appointing David Chapman, the Official Receiver, as liquidator.455
Box 4: Administration or liquidation
| Administration provides for the potential rescue of the company or its business. Once an administration order is in place, a moratorium protects the company from legal actions whilst a survival plan or an orderly wind-down of the company's affairs is being achieved. Administration allows a company to continue to operate as the administrator attempts to find a buyer for all or part of the business. Liquidation does not allow for a potential rescue of the company. The company stops trading, employees are made redundant, assets are collected and sold and the proceeds are used to pay company debts. At the end of the liquidation, creditors are paid as much as possible and the company ceases to exist.456 |
158. The Official Receiver took on two major roles. First, it had to act as liquidator with responsibility to sell Carillion's assets and distribute the returns to creditors.457 Untangling Carillion's businesses and contracts required work at an unprecedented scale for the Insolvency Service.458 This was not helped by the administrative chaos in which Carillion was left.459 In particular, the Official Receiver found an absence of basic records.460 Second, and far more unusually, the Official Receiver was required by Government to take over the running of the wide range of public services provided by Carillion. Given the unique scale of work required to both manage the insolvency and maintain services,461 the Official Receiver applied to the High Court at the time of the winding-up petition to appoint Special Managers to assist him.462 Since the liquidation process began, the Official Receiver has secured the employment of more than 11,000 former Carillion employees, ensured the continued operation of public services, and reduced payment times for suppliers from Carillion's 120 day terms to 30 days.463 We welcome the work undertaken by the Official Receiver and his team since the insolvency, although we regret that more than 2,000 Carillion employees have been made redundant.464 The Official Receiver agreed to support compulsory liquidation, and sought the appointment of Special Managers, in the best interests of the taxpayer and has sought to achieve the best possible outcome for employees, suppliers and other creditors.
____________________________________________________________________
452 Oral evidence taken before the Liaison Committee on 7 February 2018, HC 770 (2017-19), Q104 [David Lidington]
453 Q115 [Sarah Albon]. Keith Cochrane confirmed that PwC and EY declined to act as administrators. See High Court of Justice, In the matter of Carillion plc and in the matter of the Insolvency Act 1986, Exhibit: KC1 - First witness statement of Keith Robertson Cochrane, Dated: 15 January 2018 (Not published).
454 Carillion Construction Limited, Carillion Services Limited, Planned Maintenance Engineering Limited, Carillion Integrated Services Limited, and Carillion Services 2006 Limited.
455 Letter from Official Receiver to the Chairs, 5 February 2018
456 The collapse of Carillion, Briefing Paper 8206, House of Commons Library, March 2018
457 HC Deb 15 January 2018, Col 624
458 Q1332 [David Kelly]
459 "Lack of political support doomed Carillion", Financial Times, 20 January 2018
460 Q110 [Sarah Albon]
461 The Official Receiver has been supported by around 3,200 retained Carillion staff (as at 1 May 2018).
462 Insolvency Service, Official Receiver's Update, 23 April 2018
463 Insolvency Service, Official Receiver's Update, 23 April 2018; Letter from Insolvency Service to the Chairs, 15 February 2018
464 Insolvency Service, Official Receiver's Update, 23 April 2018