As a director of a building company, you can’t overlook your personal liability, especially when your company is deregistered. This article dives into a recent Queensland District Court decision that highlights how your personal assets could still be at risk, even after your company ceases to exist.

The Case: When Deregistration Doesn’t Mean Freedom from Liability

Recently, the Queensland Building and Construction Commission (the Commission) pursued Mr Smith, a director of a deregistered building company, to recover funds paid out under the statutory insurance scheme. The payments were made because of defective or incomplete residential construction work carried out by Mr. Smith’s company before it was deregistered. The key legal question was whether Mr. Smith could still be held personally liable for these payments after his company was no longer in existence.

The Law: Sections 71(1) and 111C of the Queensland Building and Construction Commission Act

Two critical sections of the Queensland Building and Construction Commission Act 1991 came into play:

1. Section 71(1): This section allows the Commission to recover any payments made under the statutory insurance scheme from the building contractor responsible for the work—or any other person whose actions led to the claim.
2. Section 111C: This section outlines how directors can be held personally liable for amounts their companies owe.

The Argument: Does Deregistration Erase Your Personal Liability?

Mr. Smith’s defence hinged on the idea that his company’s deregistration had erased any debts it owed to the Commission. This argument is based on Section 601AD(1) of the Corporations Act 2001, which states that a company ceases to exist upon deregistration, thereby extinguishing any claims against it.

However, the Commission argued—and the court agreed—that Section 111C(7) of the Queensland Building and Construction Commission Act makes it clear that a director’s personal liability persists for these amounts, even if the company is deregistered.

The Court’s Ruling: Your Liability Doesn’t End with Deregistration

The court ruled that Mr. Smith could indeed be held personally liable under Section 111C(6), despite his company being deregistered. The reasoning was that the Commission’s right to recover payments made under the insurance scheme remains enforceable against the director, regardless of the company’s status.

What This Means for You as a Director of a Building Company

This ruling serves as a crucial reminder: deregistering your company doesn’t necessarily shield you from personal liability for amounts owed under the statutory insurance scheme. If your company has unpaid debts or unresolved claims related to construction work, those liabilities could become your personal responsibility. This could put your personal assets, including your home or savings, at risk.

Key Takeaways for Directors

• Understand your risks: Statutory entitlements like those under the insurance scheme can be enforced against you personally, not just the company.
• Seek legal advice early: Before deregistering your company or facing claims, consult with a legal professional to understand the full scope of your potential liabilities.

If you need further assistance or have specific questions about how these provisions may impact you, don’t hesitate to reach out to our team for guidance.

The content of this publication is intended to provide a summary and commentary only. It is not intended to be comprehensive nor does it constitute legal advice, and has been prepared based on applicable legislation and case authority at the date of publication. You should seek legal advice on specific circumstances before taking any action.