A company failure follows the people involved for three years, across state borders, and it gets tested at renewal as well as at application. Here is what the law asks them to prove.

Western Australia can stop a building company from being registered because of who sits on its board. Not because of what that company has done, but because one of its officers was previously an officer of a construction company that failed.

Those powers have been law since February 2023. In April 2026 they were tested properly at the State Administrative Tribunal for the first time in a way that shows the standard being applied, and the regulator has since signalled it intends to keep using them.

The decision is worth understanding, because the law contains a defence that lets a director avoid exclusion entirely. It is a real defence with a clear statutory checklist behind it. In the matter the Tribunal considered, the applicant failed it on both limbs, and the reasons why are the most transferable part of the whole thing.

What the exclusion powers actually do

Part 5A of the Building Services (Registration) Act 2011 lets the Building Services Board declare a person an excluded contractor. It reaches individuals, partnerships and unincorporated bodies, and companies.

Once a declaration is made, the Board has no discretion left. It must refuse to register or renew that contractor, and it must cancel any existing registration. Without registration you cannot take on larger building work or obtain home indemnity insurance, which in practice ends the business.

A temporary exclusion runs three years from the insolvency event. Repeat insolvencies can support a permanent exclusion, subject to a five year window between events.

The provisions were inserted by the Building and Construction Industry (Security of Payment) Act 2021 and commenced on 1 February 2023. They sit alongside separate financial oversight legislation introduced to the WA Parliament in May 2026, which targets builders showing financial strain before they collapse. Part 5A deals with what happens to the people afterwards.

The two year reach is the part most directors miss

A company can be declared a temporarily excluded contractor if one of its officers was an officer of a construction company at the time that company became insolvent, or within the two years immediately before it did.

Stepping off the board eighteen months before a collapse does not put you outside the window. It puts you inside it.

Three definitions widen the net further, and each one catches people who assume they are clear.

•   “Officer” takes the Corporations Act meaning and adds an influential person, being an individual who controls or substantially influences the conduct of the company. Lawyers, accountants and consultants acting only in that professional capacity are carved out. Someone running the business without a formal title is not.

•   “Construction company” covers a company that carried out construction work in Western Australia or in any other state or territory. A failure on the east coast counts in Perth.

•   An insolvency event includes the appointment of a liquidator, provisional liquidator, administrator, including an administrator of a deed of company arrangement, or a receiver, as well as a winding up.

The defence, and why it has two limbs

The Board must not declare a person an excluded contractor if that person satisfies it of two things.

•   That reasonable steps were taken to avoid the circumstances that resulted in the insolvency.

•   That sufficient arrangements are in place to ensure the construction work business will be managed in a competent and proficient manner.

The Tribunal confirmed the point that decides most of these matters. It is prevented from making a declaration only if satisfied of both. Meeting one limb and missing the other is a loss.

How the Tribunal applied it

In the April 2026 decision, a company had applied for registration as a building contractor. One of its two directors had been a director of an earlier building company that went into liquidation. That shared directorship was the trigger. The company argued it met both limbs of the defence. The Tribunal was satisfied of neither.

On reasonable steps, the Tribunal accepted that the earlier company had done some things to address its position, including reducing operational costs and overheads. It was not satisfied those steps were sufficient, or taken early enough, to count as reasonable steps. The evidence indicated the company had been in a difficult financial position for an extended period.

The applicant pointed to payment arrangements with the Australian Taxation Office covering significant tax debts and unpaid employee entitlements, and offered those as proof that reasonable steps had been taken. The Tribunal read them the other way. The need for those arrangements, and the eventual inability to keep up with them, indicated a company already in serious distress. The deteriorating position had been visible in the company’s own financial statements well over a year before the liquidator arrived.

On sufficient arrangements, the Tribunal described a paucity of evidence and said the applicant had offered little beyond bare assertion. The applicant company had a second director. The Tribunal observed that where a shared directorship is the very thing triggering the exclusion power, the other director’s skills, experience and involvement in managing the company is of obvious relevance. That director took no part in the proceedings. No witness statements were lodged at all, including for the director who did appear.

Read plainly, the applicant did not lose because the framework is unfair. It lost because it turned up without evidence.

What the Act says will actually count

The legislation sets out two lists. Neither is exhaustive, but together they are the closest thing to a published marking guide.

Reasonable steps to avoid the circumstances that resulted in insolvency may include:

•   keeping proper accounting records

•   obtaining appropriate financial or legal advice before entering into significant business arrangements

•   reporting fraud or theft in relation to the business

•   putting appropriate credit arrangements in place and taking reasonable steps to recover outstanding money owed

•   making adequate provision for Commonwealth and state taxes and employee entitlements

•   ensuring there are sufficient assets to meet guarantees

Most of that list is cash flow discipline written in statutory language. Two qualifiers sit underneath it, and both favour directors. Reasonable steps do not require you to put additional equity into a failing business to prevent insolvency. And the assessment looks at what the people who could have prevented the insolvency actually knew at the time, and whether they were in a position to control those circumstances.

Sufficient arrangements to ensure competent and proficient management may include:

•   appointing additional company directors or business managers

•   engaging financial or legal advisers on an ongoing basis

•   providing sufficient working capital and equity

•   credit management arrangements and other appropriate business plans

Treat that as the evidence file a director rebuilding after a failure needs to be able to hand over. Not describe. Hand over.

Renewal is an exposure point, not a formality

Exclusion is not confined to new applications. The power can be exercised when the Board assesses an application for the grant or renewal of registration, and at any time during the term of an existing registration. Being registered before a related company failed does not put a builder outside the frame.

A related obligation catches people out regularly. A registered building contractor that is a body corporate must notify the Board in writing of any new director within seven days of the appointment. The notice has to carry an ASIC current and historical company extract obtained within the previous 30 days, the new director’s Director Identification Number where one is required, and disclosure of whether that person has been bankrupt, has an unpaid building service debt, or has been an officer of a body that became insolvent on at least one occasion in the past three years.

Failure to notify carries a fine of up to $5,000. Where the disclosed history concerns the Board, it can require the contractor to show cause why that person should remain an officer at all. Appointing a director is now a regulated event with a deadline attached to it.

The exits that do exist

Three provisions cut the other way, and all three are worth knowing before a show cause notice lands.

•   The Board must not exclude a company because a particular individual is an officer if the company satisfies it that the individual is no longer an officer. Removing the person is a statutory answer, not a workaround.

•   A declaration does not take effect until 28 days after written notice of the decision. If a review application is lodged with the Tribunal inside that window, it does not take effect unless the application is withdrawn or the decision is confirmed.

•   The Board may revoke a declaration at any time.

The show cause stage carries at least 28 days, and longer if the notice specifies it. On the evidence of this decision, that is where these matters are won or lost. By the time it reaches a tribunal you are arguing from the same file you built back then.

This is not only a Western Australian problem

Queensland has run a comparable regime for years. A person becomes an excluded individual there if they were a director, secretary or influential person of a construction company at any time up to two years before that company has a liquidator, administrator or controller appointed, or is wound up for the benefit of creditors. Exclusion runs three years from the insolvency event. Two separate events can mean a life exclusion. A company becomes an excluded company where an excluded individual is a director, secretary or influential person, and its licence is cancelled unless that individual steps away.

The two frameworks are close enough in mechanics that anyone who has been through a company failure in one state should assume the question follows them into the next one.

The scale explains why regulators are leaning on these powers now. 3,435 construction companies entered external administration for the first time in 2025-26, down 4.5 per cent on the prior year but still the largest share of any sector in the economy. Behind each of those companies is a group of directors who will at some point want to work again. Exclusion frameworks decide whether they can, and on what terms.

What to do with this

If you have been a director of a company that failed, or you are weighing up bringing in a director who has:

•   Pull the ASIC current and historical extract and check the insolvency history before the appointment, not after it.

•   Diarise the seven day notification. It is a fine if you miss it, and it is also the cheapest signal you can send a regulator that your governance is tidy.

•   Treat a show cause notice as the main event and build the file inside those 28 days.

•   Evidence beats assertion every time. Financial statements, board minutes, the dates advice was sought and what it said, the credit control process, the working capital position, and a clear account of what the other directors actually do day to day.

•   If a co director is the trigger, get advice early on whether stepping them back is the cleaner path than defending the declaration.

THE GOOD BUILDER TAKE

It is never comfortable reading about a regulator winning. But look at what this framework actually rewards.

It rewards keeping proper books. Getting advice before you sign rather than after. Making provision for tax and employee entitlements. Chasing your debtors. Not writing guarantees the balance sheet cannot cover.

That is a description of a building business run properly. Directors operating that way are not what Part 5A was built for, and the Act hands them a defence in plain words.

The ones who should be paying attention are those who assume a company failure draws a line under the past. It does not. It follows the people, for three years, across state borders, and it gets tested at renewal as well as at application.

Frequently asked questions

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The Good Builder covers news, policy and practical guidance for Australian builders and construction professionals. Subscribe to the eNewsletter or listen to The Good Builder Podcast for more.

This article is intended for general information purposes only and does not constitute legal, financial, or professional advice. Laws, regulations, and industry requirements vary by state and territory and change over time. Builders and trades professionals should seek independent advice relevant to their specific circumstances before making business, legal, or financial decisions.

Last updated: July 2026

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