Even as the industry spending booms, Levelset’s recent 2022 Construction Cash Flow & Payment Report notes just 12% of construction businesses report always getting paid on time — and unfortunately, ongoing slow payments and payment disputes can turn into bankruptcies for affected contractors.
10 Florida construction businesses filed bankruptcy claims in April 2022, with five filing for Chapter 7, one for Chapter 11, and three for Chapter 15 protection.
The five businesses filed for Chapter 7 bankruptcy in Florida in April include:
- Tri County Fence Masters LLC (April 11)
- Florida Interstate Roofing Company LLC (April 19)
- Neptune Clear Blue Pools Corporation (April 26)
- FL&G Construction Inc. (April 29)
- USA Pools Inc. (April 29)
Chapter 7 bankruptcy puts businesses in a difficult position, as it provides for the company’s liquidation — the sale of a debtor’s nonexempt assets and the distribution of any proceeds to creditors in order to pay off debts. Due to this, Chapter 7 proceedings almost always result in the dissolution of the company.
Learn more about the different types of bankruptcy chapters in construction.
Some of the companies have found themselves in especially difficult circumstances, with large imbalances between their debts and assets.
USA Pools is dealing with three lawsuits related to a single contract dispute, with two of the lawsuits dealing with slander/ libel accusations, while also holding $0 in assets against $18,665 in liabilities — a number that could grow higher depending on the outcome of its pending litigation.
They’re not alone in this group of claims, either. For example, Tri County Fence Masters listed $213,028.19 in liabilities but only $700 in assets in its claim.
One business additionally filed for Chapter 11 bankruptcy, with Melo Air, Inc. filing its claim on April 7, 2022. Chapter 11 allows for a debtor to remain in possession of the company in question and restructure its debts, making it often called a “reorganization” bankruptcy.
The company’s finances aren’t completely overwhelmed, but it’s in a difficult position. The bankruptcy filing notes that Melo Air has $81,700 in assets but a total of $239,726.56 in liabilities.
The real interest comes from three businesses filing for Chapter 15 bankruptcy, a move that isn’t seen as often:
- SRC Strategic Resources Limited (April 5)
- Bright Oriande Limited (April 5)
- SRC International (Malaysia) Limited (April 5)
Chapter 15 bankruptcy is a newer part of the bankruptcy code, only being added in 2005. It allows citizens of countries other than the United States to file claims within U.S. bankruptcy courts if they have assets, property, or businesses in multiple countries.
A foreign company may choose to file a Chapter 15 claim if they have a bankruptcy case that is pending in another country while also doing business within the United States. When this happens, the petition must prove that the foreign proceeding exists. If the company has its main interests in a foreign country, it can also have the automatic stay to protect its assets within the United States.
These particular businesses are all linked, with SRC Strategic Resources Limited and Bright Oriande Limited sharing representatives and operating in the British Virgin Islands and SRC International (Malaysia) Limited operating as another internationally-focused subsidiary of SRC Strategic.
The companies are going through voluntary bankruptcy proceedings in the British Virgin Islands, and it’s likely that they’re in proceedings looking to restructure their finances rather than as a way to settle debt before closure — they report bringing in between $10 million and $20 million in yearly revenue.
How Bankruptcy Impacts a Construction Project
How to Protect Your Payments During Construction Bankruptcy