Mining services in the spotlight

8th May, 2013

You may have noticed from recent media reports that the last few months have seen a contraction, if not a downturn, in the mining services industry. This has impacted severely on many, especially smaller organisations.

When industries contract, it can create many legal issues which, in our experience, often require urgent action.

Reviewing existing contracts

Where economic conditions have worsened since the time of entry into contracts, cost exposures (e.g. employee wages, supplier costs, leased office space) which seemed satisfactory at the time, may no longer be so.

It may be wise to closely examine those contracts and, where possible, raise issues about pricing with contracting parties. We can assist with this negotiation process, as well as pricing and other disputes as they inevitably arise.

Delay in payment

Like other industries, those in mining services require cash flow to fund their operations and expansion.  When times are tough, and customers default on payment or stretch credit terms, cash flow becomes strained having a severe impact on business.

There are avenues available for mining subcontractors who wish to secure payment of monies owing to them. While the availability of the Building and Construction Industry Payments Act is limited, there are other means to secure payment such as the Subcontractors’ Charges Act 1974. Successful claims of charge under this Act mean that monies can be paid directly by a head-contractor to mining subcontractors, and can give security to those who might otherwise miss out on payment.

We are experienced in the service of subcontractors’ charges and can take urgent action to serve notices and secure payment if required.  (A copy of our article on subcontractors’ charges is available here).

Insolvency

In the worst case, where a company’s financial situation has deteriorated to the extent it is unable to meet its debts when they fall due, the company’s directors must consider the company’s ability to continue to trade and whether to place the company into external administration.

A failure to do so may mean that directors become personally liable for debts incurred by the company where it has traded while insolvent. Similarly, a failure to take proper action in response to a company’s tax liability (for both unpaid PAYG withholding and superannuation guarantee charge) may result in the ATO issuing a director penalty notice and, ultimately, directors being held personally liable for the company’s unpaid tax (a copy of our article on directors’ personal liability under a DPN is available here).

We have experience in advising directors about their obligations under the Corporations Act 2001, responding to DPNs and advising directors of their personal liability.

If you need any assistance or advice on these matters, or would like more information on how our processes can work for you, please feel free to contact Tony Scoglio of Scoglio Law on (07) 3833 2100.

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