31 Jan 2013

Reforms to reduce insolvency in the NSW construction industry released for public comment

The final report of the independent inquiry into insolvency in the NSW construction industry was released on Tuesday for public comment.

The report is lengthy and addresses a wide variety of potential causes of contractor insolvency. It makes 44 recommendations, including reforms of the NSW construction industry to reduce both the incidence of contractor insolvency and its impact on other participants in the industry.

Key reforms proposed

Some key reforms proposed by the report include:

  • A requirement for construction trusts to be established on all private and public sector building projects valued over $1 million. This proposed reform is intended to ensure that, in the event of contractor insolvency, subcontractors would still be able to access funds paid to an insolvent contractor in respect of work performed by that subcontractor.
  • Amendments designed to strengthen and broaden the NSW Security of Payment regime. Changes proposed include the introduction of prompt payment provisions and broadening the application of the legislation. 
  • The creation of a single statutory body, the NSW Building and Construction Commission. This reform would provide a licensing system for all commercial builders and construction contractors, which would limit participation to projects with demonstrated financial backing and licensed accreditation.

We are also preparing a more detailed summary of the conclusions and recommendations set out in the report which we will send out soon.

The NSW Government has invited submissions on the report and its recommendations by 21 February 2013. If you'd like further information, or help in drafting your submission, please contact us.

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Clayton Utz communications are intended to provide commentary and general information. They should not be relied upon as legal advice. Formal legal advice should be sought in particular transactions or on matters of interest arising from this communication. Persons listed may not be admitted in all States and Territories.