ISG companies enter administration: actions for contractors and suppliers

On 20 September 2024, certain ISG companies, including ISG Central Services Limited, ISG Interior Services Group UK Limited, and others, entered administration. All UK operations of ISG ceased immediately, and administrators from EY, Timothy Vance, Alan Michael Hudson, and Dan Edkins, have been appointed to oversee the process.

ISG’s administration brings a challenging time for its contractors and suppliers.  This article addresses the key steps contractors and suppliers to ISG can take now to minimise the disruption and impact to their business and make informed decisions moving forward.

Immediate actions for contractors and suppliers pre-20 September 2024

If you were a contractor or supplier for ISG before the administration date, here’s what you need to know:

Avoid attending closed sites

The administrators have emphasised that contractors should avoid visiting ISG managed sites that are now closed. ISG’s operations have ceased completely and the administrators have been clear that parties are not required nor authorised on site.

Retrieve equipment

From 23 September 2024, all suppliers and contractors were able to recover their equipment if it remains on site or otherwise on ISG’s premises.

Equipment retrieval will not be handled by the administrators and contractors should make arrangements directly with site owners to collect any plant, materials, or tools they had on ISG project sites.  Keep in mind that site owners might be unsure of their obligations here, and there could be a backlog in accessing closed sites. Planning ahead is crucial.

Site owners and security

If you’re a site owner, consider how to maintain site security as an immediate priority if you haven’t done so already. You may need to explore options including insurance or hiring private security personnel to protect it as the administrators have confirmed that they will not be responsible for this, even though ISG may have been responsible for it in the past. Be aware that news of the collapse will be widespread and sites may be vulnerable to theft, looting or criminal damage.

Housekeeping

You should ensure that all transactions, contracts and dealings with ISG are thoroughly documented. Wherever possible, take pictures and videos of the works which have been completed. This may be useful if you want to pursue a claim or if the administrators seek to bring a claim against you.

Review your contracts and seek legal advice

It is essential to review the contract(s) that you have with ISG as soon as possible to understand the options available to you and what to do next. Some contracts will allow termination in the event of insolvency, while others may have different stipulations.

If you are able, and you choose, to terminate your contract, this will clarify your position with ISG and allow you to move quickly to find an alternative contractor. Note that the market will be busy with other suppliers or contractors seeking to do the same and competition in the market may drive up contractor prices.

Alternatively, as the administrators seek to preserve value in the ISG contracts it may be that they reach out to suppliers or contractors on profitable contracts to continue work in a bid to maximise the remaining value in work completed by ISG.

In such cases it may be worth waiting for guidance from the administrators as to their intentions. If they opt to continue work under a new arrangement, there may be opportunities to complete previously contracted tasks.

What if ISG owe me money – am I an  unsecured creditor?

If ISG owes you money it is likely you will be classed as an ‘unsecured creditor’. The administrators have already indicated that unfortunately there may not be enough funds to pay unsecured creditors, with the secured creditors and preferential creditors having priority under insolvency law.

However, the administrators will contact all known creditors in due course to explain their role and also how to submit a claim for any monies which may be due to you. You should be aware that any expenses you incur in gathering information to ‘prove’ your claim will not be recoverable from the administrators.

If you owe ISG money

If you owe ISG money, either as a contractor or otherwise, your fundamental obligation to pay ISG remains regardless of the fact it has gone into administration. The administrators will be required to recover any and all debts owed to ISG as part of their responsibility to ISG’s creditors to realise assets and maximise returns.

There is no automatic set-off right in administration, but if you believe there is a counter claim i.e., if ISG owe you money, there may be scope to reach an agreement with the administrators to pay any net difference.

New contractors and suppliers post 20 September 2024

If you began working with ISG after its administration, you will only be paid if the work or goods were authorised by the administrators in writing, with a letter of undertaking. It is crucial to ensure these requirements are met before any work is started to avoid complications down the line.

Financial implications and next steps

It is envisaged ISG’s insolvency will have significant financial repercussions for contractors and suppliers across the construction industry, especially for those heavily reliant on ISG payments. Listed below are some steps you can take to mitigate the impact on you and your business:

• Diversify revenue streams: explore other opportunities to make up for potential financial losses, such as chasing other debts or renegotiating payment terms with other clients and suppliers
• Cost adjustments: review your margins on current and future projects. It may also be necessary to assess staffing levels and make redundancies, depending on the extent of the financial impact
• Explore new contracts: some of ISG’s projects may be open to tender and negotiation. While the potential for new work is uncertain, given that ISG’s customers may also be facing financial strain, they may be willing to pay more to get delayed projects completed and avoid lengthy interruptions to their business.

Industry impact – support for job losses

Over 2,000 ISG employees have lost their jobs, including around 140 new graduates and apprentices. If you know any of these individuals, or if your company has opportunities to help, Build UK and CITB have set up a working group to assist apprentices and graduates as it is seen as of paramount importance to retain such talent and skills in the construction industry for the longer term.

If you or someone you know is an apprentice or graduate directly employed by ISG, please contact [email protected] .

As with the collapse of any business, it is essential to take legal advice where necessary – both from restructuring and insolvency professionals and employment professionals.