The Bathla Group administration is likely to have significant flow-on consequences for contractors, subcontractors, suppliers and other businesses exposed to the Group. 

Accountants and lawyers should consider whether any of their existing contractor clients may be affected. 

The client’s existing lawyers and accountants should work together to consider the following issues. 

What can the client do to protect its position this week? 

A contractor exposed to Bathla may need to act promptly to understand and protect its position. 

This may include considering: 

• contractual rights, including termination and suspension rights; 

• Security of Payment issues; 

• PPSR and other security interests; 

• amounts presently owed by Bathla; 

• progress claims and work in progress; 

• retention amounts; 

• guarantees and other third-party rights; and 

• plant, equipment and materials located on Bathla sites. 

The position may be particularly important for contractors who are continuing to work on Bathla projects or who are being asked to continue supplying goods or services. 

Before continuing to incur significant costs, the contractor should understand the basis on which those costs will be funded and paid. 

Can the contractor’s business withstand the financial impact of Bathla? 

This is the second, and potentially more significant, question. 

A contractor may have been profitable and financially sound before the Bathla administration. However, the loss or delay of a substantial Bathla receivable may create significant cash-flow and solvency issues. 

The contractor may still have to meet: 

• employee wages; 

• subcontractor and supplier payments; 

• ATO liabilities; 

• bank and equipment finance; 

• rent and other overheads; and 

• costs associated with completing other projects. 

A contractor owed several hundred thousand dollars by Bathla may therefore find itself facing a cash-flow crisis even though its underlying business remains viable. 

This is where the potential domino effect arises. 

The financial difficulties of a major developer or builder can flow through the construction supply chain, affecting contractors and subcontractors and, in turn, the businesses to which they owe money. 

Accountants and lawyers should consider the wider exposure 

The immediate issue may not be limited to a client that has a direct contract with Bathla. 

An accountant or lawyer may have clients who are: 

• contractors directly engaged by Bathla; 

• subcontractors engaged by Bathla contractors; 

• suppliers to Bathla contractors; 

• consultants or service providers working on Bathla projects; or 

• otherwise dependent on businesses with significant Bathla exposure. 

It may therefore be worth reviewing the client base now to identify businesses that could be affected. 

When should restructuring or insolvency advice be considered? 

Where a contractor has a significant Bathla exposure, its accountant or lawyer may identify that the issue extends beyond the recovery of the Bathla debt. 

Questions may include: 

Can the business continue to meet its debts as they fall due? 

What happens if the Bathla debt is not recovered for several months? 

Does the business have sufficient working capital to continue trading? 

What steps can be taken now to manage the financial impact? 

Are restructuring or formal insolvency options required? 

Early advice can be important. The options available to a financially distressed company may depend upon its circumstances and the timing of the intervention. 

Working with the existing professional advisers 

Levi Consulting can work with the client’s existing accountant and lawyer to assess the potential restructuring and insolvency implications arising from the Bathla administration. 

The client’s existing professional advisers remain involved in their respective areas of expertise, while Levi Consulting can assist in assessing the company’s solvency position and the restructuring or insolvency options available. 

I am available to join a Teams call with the accountant, lawyer and client where that would assist. 

If you have contractor clients with significant exposure to Bathla, or clients who are significantly exposed to contractors working for Bathla, it may be worth reviewing your client base now. 

If you would like to discuss a particular client, please feel free to contact me – David Levi on 0418 602 466 

This article is general information only and is not intended to constitute legal, accounting or financial advice. The circumstances of each business will be different and appropriate professional advice should be obtained.