The Industry and Current Legislation -
The NSW building and construction industry (the Industry) is plagued by a high level of insolvencies. In the 2012 financial year, almost 25% of the external administrations reported in NSW to the Australian Securities and Investments Commission (ASIC) related to the Industry - the highest of any defined industry. The impact of head contractors becoming insolvent is that substantial financial pressure is imposed on subcontractors which subsequently results in a rise in subcontractor insolvencies. In response to the high levels of insolvencies in the Industry, the NSW government initiated an Inquiry which released a final report on 28 January 2013 (Report). A response from the NSW government was then published on 18 April 2013 (Response) outlining the reasons why the NSW government did or did not support each recommendation.
Although there are existing protections for a subcontractor, such as the Building and Construction Industry Security of Payment Act 1999 (NSW) (the Act), these provisions fail to protect against insolvency of the head contractor. Given the findings of the Report, the effectiveness of existing protections must be considered in the context of current Industry conditions and the relative bargaining strength of subcontractors.
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