Also known as a ‘Schedule B – Statement by Covenantor’s Solicitor‘ or simply a legal advice certificate, they provide certification that a person has obtained legal advice about the risks and obligations associated with being a covenantor to a company licensed by the Queensland Building and Construction Commission (QBCC).
A Deed of Covenant & Assurance is required by the QBCC when a licensee company is unable meet the minimum financial requirements to obtain a QBCC licence. Usually, the Deed is given by the licensee company’s Director (or multiple Directors) and is, in essence, to provide financial backing to licensee company up to a ‘defined amount’ which is determined by certain criteria set out by the QBCC.
You will need to have obtained financial advice from your accountant first to produce the required financial documentation to support an application to the QBCC (and discover your ‘defined amount’) before attending on a lawyer for the advice and certification.
The lawyer must certify that they have: 1. Given you the required legal advice; and 2. That you understood it. It is only after the lawyer provides you with the legal advice and you fully understand it, should you decide to enter into the Deed.
Here a few basic things to consider when making your decision.
The Deed will be called upon in the event that the licensee company fails and is wound up in insolvency.
When that happens, an Insolvency Trustee will take control of the licensee company and collect all they can for the creditors.
You will have no control over whether the demand is made or not.
The Deed will be in place until such time as you are released from it or it is otherwise revoked by the QBCC in writing and signed.
Never rely upon a promise or assurance that the Deed will not be called upon and always insist on a written and signed revocation by the QBCC.
If the licensee company is sold or you cease being a Director, the obligations under the Deed do not cease and can still be relied upon ‘at call’ by the licensee company to pay its debts when wound up.
You are also unable to assign the Deed to another, without the consent of the QBCC (which in effect is the third party entering into a new Deed and you being released).
A Deed of Covenant & Assurance cannot be revoked by you, without the QBCC’s consent, in writing, and signed.
The likelihood is, the QBCC will never consent to release you as a covenantor unless the licensee company meets the minimum financial requirements on its own, or you find a replacement covenantor to take over.
A Deed of Covenant & Assurance requires you to charge all your real and personal property to secure your obligation to pay the defined amount, on demand.
It is therefore secured by every property, savings, money or other assets you might own now, or you later acquire in the future.
If the demand is made on you, an insolvency trustee may take everything to recover the defined amount.
Even when revoked, the Deed will still apply to any obligation to pay the defined amount which might have arisen during the period for which the Deed applied before revocation and which later becomes payable.
The above are just some of the important aspects of giving a Deed of Covenant & Assurance which would be discussed more in depth at the advice session to ensure that you understand the obligations and when they may be called upon.
The reality is, of course, that the QBCC will not give a licence to a company who cannot meet the minimum financial requirements and having someone give a Deed of Covenant & Assurance is a necessary step to grow and develop your business.
So, what do you need to do to get Black Bear Legal to give you legal advice and get a statement?
Your accountant will have prepared the financial documents required to support your application to the QBCC determine the ‘defined amount’ needed to meet the minimum financial requirements. Your accountant will also prepare, for you as covenantor, a statement of financial position.
Once you have all those documents you need to read them yourself carefully. They should consist of;
1. A Minimum Financial Requirements Report.
2. A Covenantor's Statement of Financial Position.
3. A draft Deed of Covenant & Assurance.
Then, simply contact us and let us know you need our advice on a Deed of Covenant & Assurance.
We will ask you to get a copy of all the documents to us, so we can read over them before setting up an appointment to give you the advice you need.
That appointment normally takes around 30 minutes to 45 minutes and must be attended by you.
After receiving our advice we’ll provide you with signed ‘Statement by Covenantor’s Solicitors and witness you signing the Deed.
We charge fixed fees for providing the legal advice needed, supplying the Statement by Covenantor’s Solicitor and witnessing your Deed of Covenant & Assurance of $440 (Inc GST).
If there are two covenantors to the same licensee company then we charge $660 (Inc GST) for advising both (which must be done separately).
In some circumstances it may be necessary to obtain a current ASIC Search to confirm the Directors of the licensee company which will incur a further small charge.