Over the past year, the Covid-19 pandemic upended many industries. While the construction industry has largely been able to operate throughout the pandemic, albeit with increased and ever-changing restrictions on jobsites, one consequence of these disruptions may be an increase in construction-related bankruptcy filings. Already in 2021, there have been over 70 construction-related bankruptcy filings across the country. For many property owners and real estate developers, these filings create a nightmare scenario where work may slow or even stop entirely.

The States of Guernsey has announced the recommendations from the consultation carried out on proposed changes to the Companies (Guernsey) Law 2008. This coincides with a judgment from the Royal Court highlighting the timely nature of proposed changes.

The 2008 Law was the result of a wholesale revision and consolidation of the corporate legal framework. Whilst its focus was on corporate law it also encompassed the insolvency regime in Guernsey. The consultation exercise was to determine what, if any, changes may be required now that the 2008 Law had been in place for some time.

In general, a company has two bankruptcy alternatives: liquidation under Chapter 7 and reorganization under Chapter 11.

Under Chapter 7, upon the filing of a bankruptcy petition, a trustee is appointed to gather and sell all of the debtor’s assets as quickly as possible. Once the trustee liquidates all of the assets, it must pay creditors in accordance with the priority scheme mandated by the Bankruptcy Code:

In today’s economy, we continue to see bankruptcies occurring in the construction sector. An owner, contractor, or subcontractor in financial distress can easily delay a project — or worse, jeopardize the project in its entirety. Contractors need to understand their rights in order to minimize their exposure in bankruptcy-related situations.

Protecting Contractors — Frequently Asked Questions

Everyone is familiar with the story of the dashing Musketeers – Porthos, Athos, Aramis and d’Artagnan- and their inspirational motto. At the end of his adventures, one member of this famous band retired in order to marry the widow of a wealthy French lawyer, for whom the rallying cry might well have had a different significance.

Litigation is not always about money. Sometimes, it really is about the principle of the thing. Sometimes there are rights at stake which cannot be measured in financial terms. Usually, though, litigation is born of a financial loss and ultimately what matters is that the victor receives his spoils.