If you own a Queensland-based building or construction business and are financially struggling to the point of being unable to pay your workers, suppliers or ATO tax debt, you need to take action fast.
Not only do you risk the consequences of trading while insolvent, but you also potentially face the double whammy of losing your Queensland Building and Construction Commission (QBCC) licence.
By taking advantage of the small business restructuring process (SBR process), it’s possible to save your licence and turn your financial situation around.
The Construction Industry Crisis
If you’re struggling to keep your business afloat, you’re not alone.
The serious challenges of the Australian construction industry have been widely reported. Increased material pricing, labour shortages and rain delays have all been cited as wreaking havoc on building projects.
As a result, building and construction collapses represent nearly one in three insolvencies, compared to one in five pre-pandemic. Builders behind more than 5,200 homes, worth at least a collective $2.2 billion, have reportedly collapsed since 2021. A number of major building and construction companies folded in Australia during this time, including recent failures of Porter Davis Homes and Mahercorp.
In these situations, where an insolvency event occurs (liquidation or voluntary administration), the QBCC licence held by the company is cancelled and the director’s licence is automatically suspended for three years for a first event, and cancelled for life for a second event.
If your licence is suspended or cancelled, you cannot continue building work, essentially losing your livelihood and income. If you continue to trade without a licence, you can face imprisonment.
The good news is, as a small business, you have an additional option to save your licence and business: the small business restructuring process.
What is the Small Business Restructuring Process?
The small business restructuring process is a type of formal insolvency appointment that offers a simplified and more cost-effective way to reduce your debts, extend payment terms and get your finances back on track.
Essentially it involves developing a plan to restructure your company’s operations and finances with the help of a restructuring practitioner. This plan is submitted to your creditors, and if more than 50 per cent agree, the plan is implemented.
A plan would typically include a proposal to pay a specified amount to your unsecured creditors by way of a lump sum, or instalments over a period of no more than three years.
Unlike voluntary administration or liquidation, control of your company remains in your hands throughout the SBR process.
To qualify for the small business restructuring process, you must:
- Be facing insolvency
- Be an incorporated company (Pty Ltd entity)
- Have total unsecured liabilities under $1 million
- Be up to date with employee entitlements including super
- Have all tax lodgements up-to-date
As well as saving your business, it can also save your QBCC licence by ensuring you comply with all your legal obligations.
But what are the obligations that can lead to losing your licence?
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Meet Your Obligations to Avoid Loss of Licence
While an SBR can restore your company’s solvency, you’re required to meet your other obligations as a QBCC licence holder.
Events that the QBCC consider offences leading to licence suspension are varied. The primary obligations which an SBR will not protect your QBCC licence from include failure to:
- Meet minimum net tangible assets requirements, following the restructure
- Pay a subcontractor or supplier invoice or respond to a claim and the claimant lodges a QBCC “monies owed complaint” against you
- Complete contracted works, rectify defects or otherwise respond to QBCC Home Warranty Insurance claims which both the company and the director will be liable for
Accordingly, when looking at whether the small business restructuring process can help you, consideration needs to be given to meeting the eligibility criteria, providing an acceptable restructuring plan, and complying with your other QBCC licence obligations. With our extensive SBR experience we can assist you to plan to satisfy the above.
How can the SBR Process Save Your QBCC Licence?
Firstly, the small business restructuring process isn’t considered an insolvency event under the QBCC law.
This means your licence won’t automatically be revoked simply by entering the process—a common deterrent for entering other types of insolvency appointments, such as voluntary administration and liquidation.
Secondly, the SBR process also offers you and you and your business some breathing room by providing protection from creditors while the restructuring process is underway. This relieves the risk and stress of the ATO issuing a Director Penalty Notice or Statutory Demand to force your company into insolvency, while implementing the necessary changes to restore your company’s financial health and stability.
Thirdly, the SBR process provides a formal framework for your business to restructure its ATO and some other debts to reduce them, or extend payment terms. This allows you to complete ongoing projects and can dramatically improve your balance sheet to help ensure you meet your Minimum Financial Requirements obligations to retain your QBCC licence.
A Great Option but no Guarantee
By participating in the SBR process, your small business can receive protection from creditors, demonstrate its commitment to resolving its financial difficulties, improve its financial transparency, and increase its chances of saving its QBCC licence.
But while it is a great option, it’s important to note that there is no guarantee it will save your licence. The QBCC and your creditors need to be satisfied you’ve taken all appropriate steps to restructure and that your plan is realistic and achievable.
If you or a Queensland-based construction client is having financial troubles, get in touch with us today on 1800 861 247 to learn more about the SBRP and how we can help and advise you.
Alternatively, see how we can assist with our Instant Online Assessment.
