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Deed of Covenant and Assurance

As an applicant for a licence or as an existing licensee, if you don’t have sufficient Net Tangible Assets (NTA) for the level of Allowable Annual Turnover you want, a Deed of Covenant and Assurance (“the Deed”), allows you to rely on assets assured to you by a covenantor/s, to meet the NTA requirements.  The Deed forms part of the Financial Requirements for Licensing.
The Deed will not be enforced unless:
  • an individual becomes bankrupt or
  • a liquidator is appointed to a company
The trustee in bankruptcy or liquidator may make a demand on the covenantor/s to pay the defined amount as stated in your last Independent Review Report or Audit Report.

Quick Facts

  • You cannot rely on a Deed if you have an NTA position of less than $0.
  • More than one convenantor can sign a single Deed or the covenantors can sign separate Deeds.
  • The covenantor/s must receive legal advice before signing a Deed.
  • The covenantor must have sufficient Net Real Unencumbered Assets at all times to meet the defined amount stated on the financial report and cannot include any Related Entity loans or Investments from the applicant or licensee.
  • The defined amount assured under the Deed cannot be used in the calculation of your current ratio.
  • We will hold the original of the Deed/s.
  • If there are no changes to the covenantor/s or licensee’s structure, you don’t need to submit a new Deed every year.
  • Stamp Duty is payable by the Covenantor on execution. We will not execute the Deed until such time as it is required to be called upon (i.e. the licensee has been placed into Liquidation or Bankruptcy)
  • Under certain conditions, you may revoke the Deed.

Who can rely on a Deed of Assurance?

Individual – sole trader
  • Not available
Company – trading as stand-alone company
  • Directors of the Licensee
  • Associated company of the Licensee
    • A director of a QBCC licensed company who also holds a QBCC contractor licence cannot assure assets to the company where those same assets are being used for their own individual licence.
    • A corporate shareholder of a company licensee who holds a significant, but non-controlling interest in the company (eg 40% shareholder) cannot provide a Deed.
Company Licensee – trading as part of a group of companies
  • Directors of the Licensee
  • Associated company of the Licensee
  • Other companies in the group
Individual or Company – trading in Partnership
  • Other partners within the Partnership
Note - You can only provide a Deed to an individual contractor if you are trading in partnership with that licensee. Provide a Statutory Declaration for Partnership
as evidence you are in partnership
  • Directors of a licensed company
  • Associated company of a licensed company.
Individual or Company – acting as a trustee
  • Beneficiaries of the trust where the licensee is the trustee
    • If the assets are held on trust, the Trustee cannot assure those assets
    • The beneficiaries of a trustee company trading in partnership with the licensee cannot provide a Deed of Assurance
  • Directors of a licensed company
  • Associated company of a licensed company
Note – An associated company of the licensee is a company that:
    • Is related to the licensee within the meaning of section 50 of the Corporations Act 2001 (i.e. the company is the holding company of the licensee, is a subsidiary of the licensee, or the company and the licensee are both subsidiaries of the same holding company), or;
    • Has the same shareholders and directors as the licensee

Financial Reports

The accountant or auditor when completing the financial report (eg Independent Review Report or Audit Report) will:
  • state the full name of each covenantor and their relationship to the applicant or licensee
  • state the defined amount that is secured by the Deed, or if more than one Deed, each Deed
  • provide a Covenantor’s Statement of Financial Position (Attachment 9) detailing each covenantor's financial position. This must be based on accounts no earlier than the year end date on which the applicant’s or licensee’s financial report has been based. The covenantor/s must have sufficient unencumbered assets.
Refer to the Practice Notes.
Creative Commons Attribution 3.0 Australia (CC BY 3.0)
Last updated
4/03/2014 2:03 PM

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