Some things you can’t avoid – death, taxes and the collapse of building companies.

Over the past year Perth has witnessed the collapse of a number of builders, Choice Living, Diploma and most recently Cooper & Oxley.   The impact on the community is significant, none more so than for subcontractors. Owed significant amounts for the goods and services they’ve supplied, it may be they have little chance of a fair return.

But can subcontractors improve their position when a builder collapses? Yes.

One of the key purposes for the introduction of the Personal Property Securities Act (PPSA) was to provide suppliers of goods/materials with some protection from the insolvency of their customer. In this case, subcontractors supplying materials to builders (in fact anyone selling goods on credit should be complying with the PPSA).

 

For example:

ABC Contracting is complying with the PPSA and has registered its interest over Big Building Co. The cost of registration? $6.80 to cover every sale to Big Building for the next 7 years (less than $1/year).

On Big Building’s collapse, ABC now has:

  • The highest ranking secured claim over any unpaid materials it has delivered to site and not installed;
  • The highest ranking secured claim over any debts due from the Principal to Big Building, in respect of previous supplies by ABC;
  • The highest ranking secured claim over any retention funds held by the Principal and owing to Big Building in respect of previous supplies by ABC; and,
  • A defence to any subsequent claim ABC had received a preference payment.

 

So with all these benefits and at such a low cost you’d expect all suppliers would comply with the PPSA. You’d be wrong. On average, less than 5% of suppliers bother to comply. Why?

  • It’s too complicated – maybe, but there are people who can help you.
  • It’s too expensive – it’s not, over the 7 year period of the registration you’ll spend more money on coffee.
  • My clients are ‘blue chip’, they won’t collapse – is ‘keeping fingers crossed’ really the best risk mitigator?

We strongly recommend clients selling goods/materials on credit terms, seek to comply with the PPSA, at the very least have a chat with us to see whether the PPSA is appropriate. We work with PPSA experts EDX, Simon Read and his team are very happy to chat with you and discuss all the aspects of the PPSA without charge or obligation.

Contact Simon Read here.