AustraliaMy builder went into liquidation mid-project. Can I recover costs from the company directors?
Generally, no — company directors are not personally liable for a builder’s debts unless they gave a personal guarantee or engaged in wrongful trading or insolvent trading under the Corporations Act.
What the Law Says
Under Australian law, a proprietary limited company is a separate legal entity. This means its directors are generally not personally responsible for the company’s debts — including unpaid work, defective construction, or project abandonment — unless specific statutory exceptions apply.
The key exception is found in the Corporations Act 2001 (Cth), which makes directors personally liable if they allow the company to trade while insolvent. Section 588G creates a civil obligation: a director must prevent the company from incurring debts if it is insolvent or would become insolvent as a result.
To succeed in recovering costs from directors, you would need to prove they knew, or ought reasonably to have known, that the company was insolvent when it accepted your deposit or continued work on your project.
The liquidator — appointed by ASIC — is primarily responsible for investigating potential insolvent trading claims. You, as a homeowner, cannot directly sue directors without evidence and often require the liquidator’s cooperation or court leave.
Statutory TextA director of a company is under a duty to prevent the company from trading while insolvent.
— Corporations Act 2001 (Cth), s. 588G — Duties of directors where company insolvent or likely to become insolvent
Statutory TextA person who is involved in the management of a corporation is taken to have aided, abetted, counselled or procured a contravention… if the person has engaged in conduct that contributed to the contravention.
— Corporations Act 2001 (Cth), s. 79 — Involvement in contraventions
What to Do
Contact the appointed liquidator (details are on ASIC’s Insolvency Notices website) to report your loss and ask whether insolvent trading is being investigated.
Gather all contracts, invoices, bank statements, emails, and site records showing payments made and work completed before liquidation.
Seek legal advice about whether your claim may fall under home warranty insurance (if licensed and registered in your state) — this is often faster and more reliable than pursuing directors.
Do not delay: claims against directors for insolvent trading must generally be brought within 2 years of the company’s liquidation commencement date.
Sources
Not legal advice. This article is general information based on publicly available sources, written for educational purposes. Laws change and individual situations vary. Consult a licensed attorney in your jurisdiction before acting on anything you read here. Last reviewed: 2026-06-08.