9 - Insolvency
Insolvency of an Employer
9.1 Upon the Insolvency of the Employer under a Tier 1 Contract, we will hold the balance of all sums held in the relevant Tier 1 Contract Account on trust for the Tier 1 Contractor and, where applicable, the Supply Chain.
9.2 The Tier 1 Contractor agrees that it will not seek the release of the funds we hold for it until:
9.2.1 It has uploaded to the online portal:
(a) A valid and completed Release Notice complying with Rule 3.18; or
(b) Suitable evidence that the Tier 1 Contract has been terminated; and
9.2.2 all linked Subcontracts have been discharged from the Scheme.
9.3 Provided that the condition in Rule 9.2.2 is met, we will release to the Tier 1 Contractor:
9.3.1 Any Tier 1 Retention covered by the Release Notice, if one has been provided; or
9.3.2 The balance of the Tier 1 Retention, if evidence of the termination of the Tier 1 Contract has been provided,
Within two Business Days of receipt of the Release Notice or evidence of termination, as the case may be.
9.4 If there is any cash left in the Tier 1 Contract Account following the release of the Tier 1 Retention, we will hold the balance on trust for the Employer and will deal with it as directed by the Employer’s administrators or liquidators.
9.5 Upon the distribution of all funds from the Tier 1 Contract Account under Rules 9.3 and 9.4, the Contract will be discharged from the Scheme.
Insolvency of a Tier 1 Contractor
9.6 Upon the insolvency of a Tier 1 Contractor the following rules will apply:
9.7 If there are no linked Subcontract Accounts, the funds we hold on deposit in the Tier 1 Contract Account will be sent to the Employer at the same bank account from which they were originally received. If the Employer no longer maintains the said bank account, we will contact the Employer to establish which account the funds should be sent to.
9.8 If there are linked Subcontract Accounts:
9.8.1 Any funds in the Tier 1 Contract Account that are not held on trust for any Subcontractors at the time of the Tier 1 Contractor’s Insolvency will be released to the Employer on the same terms as in Rule 9.7.
9.8.2 Where we hold parts of the Tier 1 Retention on trust for the Supply Chain in linked Subcontract Accounts, the trusts established by Rules 4.6 to 4.13 will remain in place.
9.8.3 Each Subcontractor must upload to the online portal either:
(a) written confirmation (in the form of a termination notice) that the relevant Subcontract has been terminated; or
(b) written confirmation that a third party has exercised step-in rights over the Subcontract.
9.8.4 We will take no further action in respect of any Subcontract Retention until the Subcontractor that is entitled to it has taken one of the steps set out in Rule 9.8.3.
9.8.5 If a Subcontractor uploads confirmation that its Subcontract has been terminated, we will release the Subcontract Retention to the Subcontractor at any bank account held with a Bank located in the United Kingdom within five Business Days of receiving the relevant account details from the Subcontractor.
9.8.6 If a Subcontractor uploads confirmation that a third party has exercised step-in rights over the Subcontract, it must notify us of the identity of the replacement contractor and provide us with contact details of an individual who has authority to agree on behalf of the replacement contractor to join the Scheme. We will contact the replacement contractor to seek their consent to joining the Scheme.
9.8.7 If the replacement contractor agrees to join the Scheme:
(a) It will be required to apply for a Contract Account following the procedures set out in the Pre-Qualification Information;
(b) Assuming its application is successful:
(i) We will open a new Tier 1 Contract Account;
(ii) The existing Subcontract Retention will be transferred to the new Tier 1 Contract Account; and
(iii) The Subcontract will from then onwards be administered under the Scheme as a Tier 1 Contract with the replacement contractor as Employer, and the former Subcontractor as Tier 1 Contractor.
9.8.8 If a Subcontract Account is converted into a Tier 1 Contract Account under the process in Rule 9.8.7, the replacement contractor (acting as Employer for the purposes of the Scheme) will have no liability either to us or to its contractual counterparty in respect of:
(a) Any breaches of these Rules by the Insolvent original Contractor; or
(b) Any shortfall in the Tier 1 Contract Account at the time the replacement contractor joins the Scheme (and the replacement contractor will be required under these Rules only to pay in to the Tier 1 Contract Account such Tier 1 Retention as becomes due for withholding under the relevant Contract from the date on which the replacement contractor joins the Scheme).
9.8.9 If the replacement contractor does not agree to join the Scheme:
(a) We will not accept any further payments into the relevant Tier 1 Contract Account in respect of the relevant Subcontract Retention;
(b) We will hold the Subcontract Retention on trust for the Subcontractor until it provides us with an appropriate Payment Notice confirming that the Final Release of Retention is due to it under the Subcontract;
(c) Upon receipt of a Payment Notice complying with Rule 9.8.9(b), we will release the Subcontract Retention to the Subcontractor at any bank account held with a Bank located in the United Kingdom within five Business Days of receiving the relevant account details from the Subcontractor.
Insolvency of a Subcontractor
9.9 Upon the Insolvency of a Subcontractor, any funds that we hold on trust for that Subcontractor will be released from the Subcontract Account and will once more be held on trust for the Contractor under the relevant Tier 1 Contract. The Subcontract will be discharged from the Scheme.