A DISPROPORTIONATE number of ACT companies, including those in construction, are going broke because they are under-capitalised, according to liquidator Eddie Senatore, who has more than 25 years' experience in insolvency.
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This occurs when a company cannot afford operational expenses because of a lack of capital.
For the ACT, the problem accounts for 16 per cent of insolvencies, almost twice the national average at 9 per cent. Unforeseen penalties, work site disputes, legal challenges to projects or attempts to expand companies too quickly can lead to bankruptcy in cases of under-capitalisation.
Mr Senatore said the effects of collapses trickled through to subcontractors in the building trade.
"The work is done and the money is owed but the collapse obviously means that money in most cases is not going to get paid,'' he said.
"In some cases you might get 10 or 15 cents in the dollar on what you are owed but you're still losing a significant investment there. These people need to continue to trade and find the costs that they have incurred.''
The Construction, Forestry, Mining and Energy Union, representing many besieged subcontractors, has focused its frustration on the big end of town.
Speaking in general terms about company collapses, CFMEU ACT branch secretary Dean Hall said smaller players were under unreasonable pressure from large companies in the industry.
"Building and construction is a ruthless, unfair market where small subcontractors and workers are left, often, at the hands of large builders and developers,'' Mr Hall said.
"My experience in the commercial construction sector is that the pressure applied by developers and builders, in screwing hard on subbies and their workers with unscrupulous tendering or contractual processes, is by far the cause of all the problems we're having.
"Very few people will talk. Builders might think it is funny that someone dumps a pile of shit on their competitor, but do you think they're going to give them [the subcontractor speaking out] the next job?''
MARK SAWA and PHILLIP THOMSON
