Project retention in the building industry is one thing my clients are all too often nervous about. When projects fall over they put a big dent in cash-flow. If the firm holding the project goes bust, monies received could be recovered by the liquidator under the Companies Act 'voidable transaction' regime - even for work completed and paid for months or years prior.
For any honest contractor this methodology seemed absurd. In my experience the legislation appeared to be applied to combat those fraudulent acts involving collaboration between main contractor and ‘mates’ or associated companies; in practice however it was being applied by zealous liquidators, carrying out their duty for the 'greater good' of unsecured creditors.
A win for the little guy
A 18-Feb-15 ruling by the Supreme Court now states that transactions cannot be voided to recover monies when:
- the service was provided in good faith
- you did not suspect the company was insolvent.
A win for the little guy, and a win for the honest.
Word of warning - manage your risks
A final word of warning: Working for a company you suspect to be running so close to the wire they may fall at any time is not good for your business!
We all know that... but it is a trading risk many of my clients and other businesses commonly take.
If this is the case I recommend talking to a good broker about how Trade Credit insurance can help to manage this risk for your business.
About the AuthorName: Guy Worsley
I am a Commercial Broker at Rothbury Auckland. My 18 years experience both in New Zealand and international markets coupled with my high service standards means that I can help clients navigate their way through the complicated insurance…
I am a Commercial Broker at Rothbury Auckland. My 18 years experience both in New Zealand and international markets coupled with my high service standards means that I can help clients navigate their way through the complicated insurance landscape.
My clients come first. It’s vital to spend time understanding my clients’ business before I provide advice. This advice is assured as I have wide knowledge and experience of liability, professional risks, property motor and marine insurance.
Plus, I am proud of my proven ability to negotiate win : win claim solutions and advise on technical insurance matters.Close