Trustees, receivers and appointees in insolvency proceedings
Aug 26, 2026
By: Itzick Simon
Trustee today. Ordering the work tomorrow? When project management changes hands
The collapse of a construction or contracting company does not necessarily lead to a halt in the work. In many cases, the court appoints a trustee, special administrator, receiver or other person in charge, with the aim of stabilizing the company, protecting its assets and leading the project to completion. However, it is at this stage that one of the most complex and sensitive issues in the implementation of the new safety regulations arises.
The person in charge enters the project to resolve a financial or legal crisis. However, without intending to do so, he may find himself faced with an entirely different question: Does the mere fact of assuming control over the project management also entail liability under safety regulations?
The safety regulations do not currently provide an explicit answer to this question. However, the absence of an explicit provision does not eliminate the risk. As the position holder receives broader management authority, the question may also arise as to whether, along with the authority given to him, the duties and responsibilities associated with it have also been transferred to him, to some extent.
As authority expands, exposure may also expand.
In practice, a position holder may approve the continuation of work, select new contractors, approve contracts, appoint officials, make budgetary decisions, order the resumption of work, and even actually manage the project.
As his involvement in project management becomes more significant, the claim may arise that he is no longer the entity managing the insolvency process alone, but rather someone who actually exercises powers that the regulations attribute to the work commissioner or the permit holder.
This does not mean that in every case the holder of the position becomes the person who orders the work or automatically assumes responsibility according to the regulations. However, to the extent that there is an overlap between the powers he exercises in practice and the powers that the law imposes on the person who orders the work or on the permit holder, the claim may also arise that, along with the authority he received, the duties and responsibilities associated with it have also been transferred to him, to a certain extent.
As long as the project is running smoothly, the question of the extent of the person in charge's responsibility may remain theoretical. However, after a serious work accident, the reality changes.
Investigative authorities, law enforcement agencies, and courts are not content with examining the official title of each of those involved. The questions they will ask will be completely different:
Who made the decisions? Who actually controlled the management of the project? Who was authorized to stop the work? Who approved its resumption? Who could have demanded the correction of the safety deficiencies and did not do so?
To the extent that the answers to these questions point to the position holder, an examination of his personal responsibility may also arise, alongside the responsibility of the other parties involved in the project. In the final analysis, the court may attribute greater weight to the actual administrative reality than to the formal definition of the position.
This is precisely the moment when a position holder, appointed to save a project and protect the rights of creditors, may find himself also facing claims of personal, civil and even criminal liability for a safety incident - an exposure that was not even in his mind when he accepted the appointment.
The reality check will come after the accident.
The appointment of a trustee, special administrator, or receiver should not be examined solely through insolvency law. When it comes to an active construction project, the implications of the appointment in the areas of safety, liability, and insurance should also be examined from the first day of the position.
The closer the position holder actually comes to fulfilling the duties of the work commissioner or permit holder, the greater the need to examine whether, along with the authority he has received, he may also be exposed to the responsibilities that the law attributes to these positions.
Therefore, upon assuming office, it is appropriate to re-examine the project's safety management system, the identity of the functionaries, the division of responsibilities, the project's compliance with regulatory requirements, the contractual agreements, and existing insurance coverage. In some cases, these steps may be no less important than the economic and legal steps taken as part of the insolvency process.
Sometimes, the path to saving the project can also become the entry point for personal responsibility. Therefore, every position holder who takes over the management of an active construction project must ask himself on his first day not only what powers he has been granted, but also what duties and responsibilities may accompany them. At the end of the day, responsibility may derive not only from the title he has been given, but mainly from the role he actually played and the decisions he made along the way.
The discussion in this chapter is intended to address a legal issue that is currently developing. The scope of a functionary's liability in insolvency proceedings will be determined in each case in accordance with the provisions of the law, the court's decisions, and the specific circumstances of each project.
The meaning in terms of liability, risk management and insurance
Food for thought
Sometimes, it is the first decisions made after the collapse of a contractor that have the greatest legal significance. A decision to continue the work, to contract with contractors, to order urgent work, or to allow officials to enter the site, may also affect the examination of the position holder's status and the scope of responsibility that will be imposed on him later.
Therefore, before any operational decision is made, it is recommended to conduct an integrated examination of the legal, safety, and security aspects of the project.
In construction projects, taking control of project management may also be the starting point of new responsibilities.
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