Building Businesses: QBCC contractors financial fails update

Michael Chesterman August 1, 2019
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In my previous article I outlined how new Minimum Financial Requirements for Licensing (MFRs) that came into effect on 1 January 2019 were proving very challenging for many contractors to satisfy. 

In a government information bulletinit is stated that the new MFRs:  

“will ultimately enable the QBCC to more effectively detect and minimise the impact of potential insolvencies and corporate collapses.” 

The level of commitment by the QBCC to enforce the MFRs is evidenced by their suspension of several large contractors’ licences.  In my previous article I identified four such contractors, namely: 

In respect of these four contractors, in each instance their licences were only suspended for several days and at the time of publishing this article all have current active licences.  

On 29 July 2019, the QBCC suspended the licence of another large contractor, Rgd Group Pty Limited (licence number 15022690).  In an article in the Courier Mail it is stated: 

“QUEENSLAND’S building regulator has suspended the licence of one of the Sunshine Coast’s largest builders, the head of which has blamed a monumental paperwork stuff-up for its plight. 

The Queensland Building and Construction Commission made clear late yesterday it had received no monies-owed complaints against the company 

A QBCC spokesperson said RGD Group Pty Ltd had its licence suspended on July 29, 2019, for failure to meet minimum financial requirements. 

The decision to suspend a company’s licence followed a 21-day show-cause period, after a considerable assessment of the information provided. 

RGD Group’s founder and director Ron Grabbe (pictured) said the matter related to an administrative error. 

“For over 35 years RGD Group has delivered award-winning, quality construction and development services Australia-wide,” he said. 

“This is not a financial matter, it’s an administrative error regarding us missing a deadline to provide paperwork to the QBCC. 

“We are working with the QBCC to resolve the matter quickly. 

“We have three major projects currently under construction and two in development stages with a total value of around $154m and 200-plus people working on them.” 

At the time of publishing this article Rgd Group Pty Limited’s licence remains suspended. 

Helix Legal Insight 

On 30 July 2019, at an estimates hearing, the QBCC Commissioner, Brett Basset advised that in relation to licensees who have a maximum revenue turnover of more than $30M: 

Specifically in respect of those new laws, as at 30 June 2019 I can say that 742 of 765 category 4 to 7 licensees had provided financial information that was required to be provided by 31 March this year. As at that period of time we had suspended 17 licences and imposed conditions on seven licensees for failing to meet the minimum financial requirements.” 

At the same estimates hearing, the responsible Minister, Mick de Brenni provided valuable information relating to the MFRs, namely: 

“There is a new penalty for failure to provide financial information, of 20 penalty units. We reduced the net tangible asset report trigger to 20 per cent for licence categories 4 to 7, ensuring QBCC has the information it needs and at a time it needs it. This gives the commission early warning of changes in the financial health of a licensee and subsequently reduces the impact of company collapses. 

There is also a new penalty for failing to advise the QBCC. We have introduced a more robust approach that assesses licensees’ abilities to pay debts. It is more of a balanced scorecard approach— a tiered, risk based approach—that puts the requirements where the risk is. We have also afforded the commission greater scrutiny around the use of assurance, in particular around the use of deeds of covenant and assurance and related entity loans, to meet the minimum asset thresholds, thereby lifting the lid and ensuring that assets that are supposed to be there are there and that they are not encumbered for somebody else.  

Of course, we have expanded exclusions to ensure licensees cannot use their personal toys to boost their financial position. People cannot pay their rent with a jet ski or a golf cart. We have worked closely with industry to make sure that we have this right, and we have, and we know it is working because the industry is responding.  

The QBCC has been working with 765 of the state’s largest licensees to audit their financial health. I am very pleased to announce today that, as a result of the new minimum financial requirement laws and the QBCC’s enforcement action, $323.7 million has been injected into the Queensland construction industry by licensees, and this included seven licensees with increases of more than $10 million each.” 

Building Businesses: a conversation with the QBCC  

Helix Legal will address issues like the MFR at the upcoming event called “Building Businesses: a conversation with the QBCC” where Brett Bassett and a number of senior QBCC staff will be participating in a Q&A style event. 

The MFR and how they are being enforced by the QBCC will be one of several issues discussed at this event.  

If you are a contractor, the MFR insight you will obtain will be beneficial to your business.   

If you are an accountant or insolvency practitioner, anything you learn may assist you in advising contractor clients meeting the MFR. 

Numbers are limited so if you or any of your colleagues or contacts are interested in attending this event, I would recommend that you promptly register.   

We look forward to hosting the inaugural event for the Building Business Series at Helix Legal on 26 September 2019. 

Not intended as legal advice. Read full disclaimer.
Michael Chesterman August 1, 2019

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