Construction giant ProBuild has recently appointed Deloitte as administrator after it’s parent company WBHO South Africa announced it would cease support for its ailing subsidiary. This has left many tradesmen and subcontractors owed large sums of money and in the dark regarding their compensation and rights. Whilst time will allow for an investigation into the affairs of ProBuild and to determine what went wrong, we believe that it is important that any creditor of ProBuild urgently consider their position. To assist in this regard, we have prepared this quick guide for creditors who want to better understand their situation and the administration process.

Consider Your Position as a Creditor

Whether you are a secured or unsecured creditor can drastically change your rights in an administration. You are a secured creditor if you hold a Personal Properties Securities Register (PPSR) registration over an asset provided to the company. Secured creditors can repossess these assets with the consent of the administrator or court at the end of the administration.

Check if You Can Lodge a Worker’s Lien

Subcontractors in the construction industry who have not been compensated for materials or building works are able to lodge a worker’s lien. This can only be done if your debt has been outstanding for less than 28 days and only covers and is only relevant to the amounts that are due. If a head contractor has subsequently engaged you, you may have the additional right to a statutory charge over any money that remains unpaid.

Act Quickly as an Unsecured Creditor

For the majority of creditors in this administration, unless the above applies you are likely to be classified as an unsecured creditor. This primarily means you cannot undertake any debt enforcement action against the company without the permission of the court or administrator. The likelihood of you receiving compensation for what you are owed in the form of a dividend is dependent on assets recovered by the administrator. However, this usually takes a few months of investigation. It is crucial you lodge a proof of debt with the administrator as soon as possible so you are noted as a creditor and provided with up-to-date reports on the administration.

Review Your Financial Position

Whilst it is in your best interest to act quickly and stay up to date with the administration, in the case of ProBuild, it is unlikely that a dividend will be paid to unsecured creditors. To maximise your business’ chance of survival you should conduct an urgent review of your current financial position and ability to continue to trade in light of the amounts owed by ProBuild being unrecoverable. If your position is uncertain or at a significant shortfall, consider contacting us to discuss your options.

Negotiate if You Are Re-engaged On Site

Developers of ProBuild sites will need to engage the services of other construction companies to complete their projects. This offers you an opportunity to be re-engaged on the site to complete the project. In the event you are re-engaged by these new companies, ensure that you take any opportunity to re-negotiate your contract and strike a better deal. This may help to cover some of your losses from the collapse of ProBuild.