Effects of insolvency in the construction industry

The recent collapses of major builders St Hilliers, Kell & Rigby and Reed Constructions have caused such concern that the New South Wales Government has launched a public inquiry into the issue.

Given the tough economic conditions, it is timely to review your corporate obligations and the risks involved in managing debts, consider how to protect your business if a contractor or principal encounters financial difficulty, and what you can do to minimise damage to your business.

Understanding your obligations as a director

Directors owe a fundamental fiduciary duty to the company to act in good faith for the benefit of the company. The scope of this duty includes:

1. a duty to avoid situations where there is a conflict between the interest of the director and the interest of the company; and