It is no great surprise that following the collapse of Carillion and with other retail businesses teetering on the edge, insolvency and corporate recovery is back in the news.

Some of the biggest casualties of entities like Carillion are the employees. Luckily, in the Carillion failure many jobs have been saved, but there is still a residual cost to employees who have to submit claims to the National Insurance Fund and the liquidator to recover payments for unpaid wages, holiday and sick pay.

Directors of a company in financial distress will often turn to their professional advisors to assist in making decisions about the company’s future; whether that be their lawyers, accountants, bank, tax advisors or insolvency professionals.

The doctrine of substantive consolidation (generally- the power of a bankruptcy court to consolidate the assets and liabilities of affiliated entities in bankruptcy) is a recognized remedy exercised by bankruptcy courts – one that strikes fear into the hearts of many lenders. Justifiably so. The doctrine can be employed to order the substantive consolidation of related-debtor entities in bankruptcy and it can also be employed to substantively consolidate the assets of a debtor in bankruptcy with those of a related entity that is not a debtor in bankruptcy.