The monthly round-up from the Anthony Collins Solicitors charities team.
Long running concerns over the future of Interserve – the largest public sector focused contractor and outsourcing firm – took a new twist on 15 March 2019 when shareholders voted 59% against a debt-for-equity rescue package that would have seen the firm’s debts cut from £650m to £275m.
As a result, Interserve plc (the parent company) was placed into administration and the rest of Interserve group transferred to a new parent company, Montana 1 Limited (“Montana One”), which is likely to be renamed as an “Interserve” company soon.
Following only fourteen months after the collapse of Carillion, social housing providers will be concerned about the effect on delivery of construction projects and facilities management contracts with Interserve group companies. While the outcome of the administration is not yet certain, there are several steps which employers can take to protect themselves:
- First, make sure you know where your contracts and security documents (parent company guarantees, performance bonds, and collateral warranties) are held. These documents are key to working out what rights you do and don’t have.
- Second, review any contracts with Interserve for a “change of control” clause. These clauses may prohibit a change in the ultimate parent company from Interserve from to Montana One, or even allow you to exit contract completely.
- Third, review the security documents to ascertain whether you have a parent company guarantee (“PCG”) from Interserve plc. PCGs granted by Interserve plc are likely to be worthless, as Interserve plc is unlikely to have the financial capability of standing behind any claims made under the PCG. It is not yet clear what Montana One’s financial standing is. Trading in shares of Montana One is expected to commence as early as 20 March 2019, and this may give some indication as to the viability of the new parent company.
- Fourth, review the selection questionnaire used at tender stage. If the selection questionnaire requires a PCG, then the contractor no longer has sufficient financial standing to operate the contract. This may give rise to a right to terminate the contract.
- Similarly, check whether your contract has a clause which compels the contractor to maintain the level of financial standing required in the procurement process. If the contractor no longer meets this level, you may be able to terminate the contract.
More widely, there is growing concern that so many contracts are going to a few large contractors which inevitably causes widespread disruption if they fail. The challenge to social housing providers going forward is how to ensure best value in the provision of works and services in a way that is compliant with public procurement law and also spreads the risk more evenly. This is a topic for another e-briefing!
For more information
If you have any concerns about a contract with Interserve, or with any other contractor, or would like to review your procurement strategies, please do not hesitate to contact Andrew Lancaster or Richard Brooks.
In this ebriefing, we identify what we see as the key messages arising from recent prosecutions in the care and housing sectors.
A recent High Court case on costs could prove essential reading for clients who have cases in the magistrates' courts.
The employment and pensions team offer practical advice on whistleblowing.
Partners, David Alcock and Sarah Patrice, have been involved in reviewing the new Code of Governance for community-led housing, published on 21 May 2021 by the Confederation for Coop Housing.
Following the eviction ban being lifted on 31 May 2021 and further to our previous ebriefing, the new notice of seeking possession forms are now available on the Government website as Word versions.
The European Court of Justice's standpoint on the Wiener Wohnen landowning developer case, and how the level of influence over the work did not amount to a decisive influence.
The Law Commission's Technical Issues in Charity Law report revealed that many charities struggle with a range of technical issue in the law.
The Law Commission recommended four key changes to the law in respect of mergers and the incorporation of charities which we have detailed in this ebriefing.
Over the last few weeks, we have published individual ebriefings on some of the key changes to be implemented following the Government’s response to the Law Commission’s report.
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