It has recently been announced that another major building contractor, Arrow International, has collapsed, with the appointment of voluntary administrators to the company. Arrow, which had its headquarters in Christchurch, was a well-established company which employed around 250 people.

Arrow’s voluntary administration comes after the downfall of Ebert Construction and Corbel Construction in the second half of 2018. Once the move was announced, subcontractors downed tools and abandoned sites in Auckland, Hawke’s Bay and Wellington. However, it appears from the use of the voluntary administration process that Arrow may be trying to avoid the large losses that have been a feature of the collapses of other main contractors.

Voluntary administration is a process designed to help save the business of a company in financial trouble. Independent insolvency practitioners, in this case Andrew Bethell and Colin Gower of BDO, are brought in to assess whether the company’s business can continue in existence or if there is a potential outcome that would result in a better return to creditors than immediate liquidation.

The key advantage of an administration is that it imposes a moratorium on creditor enforcement steps and court proceedings, allowing the company and its administrators some breathing space to assess the company’s situation, come up with a plan for the company’s future and put that plan to creditors, who get to choose the way forward.

There are three possible outcomes that creditors can vote on in a voluntary administration:

  1. appointment of liquidators to the company;
  2. the company execute a deed of company arrangement; or
  3. the administration ends and control of the company return to its directors.

The ongoing nature of a number of Arrow’s projects means that it is a testing time for many principals, contractors and sub-contractors. Decisions will need to be made relating to current projects being undertaken by Arrow about the ownership and right to on-site tools, materials and equipment, as well establishing a path forward to ensure projects are finished in a timely and cost effective manner.

When difficult situations arise for principals, contractors or creditors, the specialist construction and insolvency teams at Kensington Swan can assist. We have previously advised a number of owners/developers, contractors and other creditors on decisions that they must make in similar collapses in the construction industry. This included the widely disruptive failures of Mainzeal and Ebert. Our experienced lawyers are ready to provide advice to those affected by the Arrow voluntary administration.

The Arrow administration is yet a further lesson for industry participants on recognising and apportioning risk appropriately in their projects. Kensington Swan also helps industry stakeholders, on a regular basis, to gain the best outcome when it comes to their tenders and any problems that may arise regarding their projects. If you need assistance with your project, our large specialist team has the expertise to help.



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