Deed of covenant and assurance | Queensland Building and Construction Commission

If you are an existing licensee or applying for a licence and you don't have sufficient net tangible assets (NTA) to meet the level of maximum revenue (MR) you want, you can use a deed of covenant and assurance.

You can download and complete our template:

Deed of covenant and assurance (PDF, 133KB)

A deed allows you to meet the NTA requirements by relying on assets assured to you by one or more covenantors. 

It will not be enforced unless:

  • an individual becomes bankrupt
  • 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 MFR report.

Using a deed of covenant and assurance as an asset

In order for a licensee to rely upon a deed, the licensee's net tangible asset position without the deed must be at least $0. (ie the licensee cannot rely upon a deed if the NTA position is negative). 

The amount being assured under the deed is only relevant to the net tangible asset position of the licensee, it is NOT included in the current ratio requirement. 

The licensee must, if reasonably practicable, ensure the covenantor's statement of financial position is prepared by the same accountant who prepares any MFR report for the licensee. This includes the deed of covenant asset for working out the licensee's net tangible assets. 

The covenantor's statement of financial position must be accompanied by a copy of each document relied on by the licensee in assessing the covenantor's eligibility to enter the deed, including evidence of the net tangible assets of the covenantor. 

Key facts

  • You can't rely on a deed if you are a SC1 or SC2 contractor. Only licensees in categories 1 to 7 are able to rely upon a deed.
  • If there is more than one covenantor, a separate deed document needs to be completed and executed for each covenantor.
  • The covenantor/s must receive legal advice before signing a deed.
  • The covenantor must have sufficient net tangible assets at all times to meet the defined amount stated on the financial report.
  • The defined amount assured under the deed cannot be used in the calculation of your current ratio.
  • QBCC will accept electronic (emailed) copies of the deed document, as long as the deed has been correctly executed. 
  • 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 must be paid if by the covenantor on execution of the deed. We won't 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?

  1. A deed of assurance is not available to sole traders.

  2. Possible assurers include:

    • directors of the licensee
    • a related body corporate of the licensee.

    Note: a director of a QBCC licensed company who also holds a QBCC contractor licence cannot assure assets to the company if those same assets are being used for their own individual licence.

  3. Possible assurers include:

    • directors of the licensee
    • a related body corporate of the licensee
    • other companies in the group.

  4. Possible assurers include:

    • other partners within the partnership
    • directors of the licensed company
    • a related body corporate of the licensed company.

    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 (PDF, 503) as evidence you are in partnership.

  5. Possible assurers include:

    • beneficiaries of the trust where the licensee is the trustee
    • directors of the licensed company
    • a related body corporate of the licensed company.

    Note: 

    • 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.

Submitting a deed with a financial report

Download and complete our template:

Deed of covenant and assurance (PDF, 133KB)

Once completed this can be submitted, along with all other financial information, when submitting your MFR report.

Your accountant or auditor must include in the MFR report:

  • the full name of each covenantor and their relationship to the applicant or licensee
  • the defined amount that is secured by the deed, or if more than one deed, each deed
  • a Covenantor's statement of financial position (PDF, 66KB) detailing each covenantor's financial position. This must be based on financial information 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 net tangible assets.

Revocation of a Deed of Covenant and Assurance

Subclause 4.2 and 4.3 of the Deed of Covenant and Assurance (Deed) sets outs the grounds of when a Deed can be revoked: 

  • Clause 4.2: 
    Revocation by satisfaction of the Minimum Financial Requirements
    The Deed is revoked if the Commission gives written notice to the Licensee and the Covenantor that the Licensee has satisfied the Queensland Building and Construction Commission (Minimum Financial Requirements) Regulation 2018 in a manner other than reliance by it on this Deed and the benefit of the covenants contained in this Deed.
  • Clause 4.3: 
    Alternatively, revocation is to be by further Deed
    Revocation of this Deed, if it is not effected by notice by the Commission under subclause 4.2, may only be effected by a further Deed by all of the parties to this Deed.
    If a new Deed is provided or if a licence is cancelled, the Deed and/or previously submitted Deeds are not automatically revoked and will continue to be valid and enforceable. Therefore, it is important that a request to revoke a Deed is made if the licensee and covenantor are no longer wanting the Deed to be valid and enforceable in the future.

If a new Deed is provided or if a licence is cancelled, the Deed and/or previously submitted Deeds are not automatically revoked and will continue to be valid and enforceable. Therefore, it is important that a request to revoke a Deed is made if the licensee and covenantor are no longer wanting the Deed to be valid and enforceable in the future.

Revocation of a Deed under Clause 4.2

In order to revoke a Deed under clause 4.2, the licensee must demonstrate to QBCC that the licensee meets the MFR in a manner other than by reliance on the Deed. To do this, the following information must be provided to the Commission:

  • An MFR Report; and
  • Accompanying signed financial statements; and
  • A written request to the Commission to revoke the Deed under clause 4.2

Note – the MFR Report being provided must not rely on the Deed of Covenant and Assurance being revoked.

Revocation of a Deed under Clause 4.3

If the covenantor has provided multiple Deeds to a licensee, the covenantor and licensee may elect to revoke the previously submitted Deed/s as the new Deed provided has superseded the other Deeds. To revoke the previously submitted Deeds, the following information must be provided to the Commission:

  • A written request to QBCC to revoke the previously submitted Deed/s under clause 4.3

How to revoke a Deed for a licensee who is cancelled?

If a licence is cancelled, and the covenantor and licensee wish to revoke a previously submitted Deed, then the cancelled licensee can still send a written request to QBCC to revoke the Deed. As the licence is cancelled, the QBCC will assess each matter case by case, and may request further information from the licensee. 

Where to submit a request to revoke a Deed

Applications to revoke a Deed of Covenant and Assurance can be submitted via any of the following methods:

Last reviewed: 22 Jan 2024 Last published: 22 Jan 2024
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