You signed something when you first got your building licence.
You probably barely remember it.
Most builders do not. It was years ago, there was paperwork to get through, and you were focused on getting started and getting the work in. But that document may still be sitting on file. And if your company is in serious financial trouble, it could put your family home directly at risk.
What Did You Sign?
In Queensland, the QBCC (Queensland Building and Construction Commission) can require a building company director to sign a Deed of Covenant and Assurance. This is a personal guarantee. You are personally promising to cover any financial shortfall if the company cannot meet its minimum requirements.
It is not a formality.
If a liquidator is appointed to your company, they can call on that guarantee. The amount owed comes from you, personally. Not the company.
Other states have similar obligations under different names. Victoria is introducing new financial requirements for domestic builders, where personal guarantees can form part of how those requirements are met. The specific document is different from Queensland’s. The risk to the director is the same.
How Does Something Like This Get Forgotten?
These documents are signed at the beginning of a business. Often a decade ago, sometimes longer.
They do not show up in your annual accounts. They do not appear on a bank statement. If you have changed accountants since you signed it, your current advisor may not even know it exists.
This is exactly how directors end up in a situation they were not prepared for.
What Happened to a Builder Who Found Out Just in Time
A Queensland residential builder was told by one advisor that liquidation was the only option. His company was no longer viable. The debts were real. Liquidation seemed like the obvious next step.
He came to de Jonge Read® for a second opinion.
A detailed review of his position revealed a Deed of Covenant he had signed years earlier and completely forgotten. It also revealed personal guarantees held by suppliers, business loans secured against his family home, and the fact that liquidation would have barred him from holding a QBCC licence for three years.
The team worked with him to develop a different strategy. He accessed equity in the family home before any insolvency event was registered, and used those funds to negotiate individual settlements with more than twenty creditors.
The company was not liquidated. The Deed of Covenant was never called on. His home was protected. He kept his licence.
Is There a Way Through This?
If your building company is under financial pressure, options exist beyond liquidation.
One is Small Business Restructuring (SBR), a formal process where you stay in control of the business while a plan is developed to repay creditors a portion of what is owed. It is available to companies with liabilities under $1 million, and it includes a freeze on creditor action while the process runs.
Another is a carefully negotiated settlement, as in the case above. The right path depends entirely on your specific situation. There is no single answer that fits everyone.
When Should You Get Help?
Now. Before anything is triggered.
The earlier a proper review happens, the more options are available. Once a liquidator is appointed, a Deed of Covenant or personal guarantee can be called on immediately. At that point, the conversation about your family home has moved well beyond your control.
If you are under pressure, or if you are not sure whether you signed something like this, the safest step is to get clarity early.
A confidential, obligation-free conversation costs nothing. Getting clarity now, while options still exist, is always easier than managing a crisis once one has started. Call 1300 765 080 or speak with the team here.
Did you know?
Phoenixing is another name of business restructure. Read more about business restructures and when this can be an option for you.
