Canberra building company Banyan Constructions has been placed into liquidation with debts of more than $21 million.

Ernst and Young were appointed as liquidators in January, and 20 staff have lost their jobs.

More than 150 creditors and about 10 projects under development are believed to have been affected.

Calls to Banyan's Fyshwick office reverts straight to a voice message, while the mobile number for its managing director, Liam Kelly, has been disconnected.

Several creditors, the majority of which are small Canberra businesses, are owed more than $1 million.

The construction union's ACT branch is on the creditors list, but is only owed $484.

CFEMU ACT secretary Jason O'Mara said the financial collapse sent a shockwave through the industry and would be catastrophic for many local companies.

"There's not many companies in town who can cop a million-dollar loss. You need a big bankroll to be able to sustain it," he said.

"Very rarely in these circumstances is there much left of any assets left in the business for any of the subcontractors, so they'll be looking at cents in the dollar if they're lucky, if there's anything.

"It's unfortunately all too common for companies to go bust, and subcontractors and workers have to wear the consequences."

The ACT Master Builders, which is also owed $800 by Banyan, said the concern now was about the secondary collapse of companies owed money by Banyan.

Chief executive Michael Hopkins said the search for replacement builders to complete Banyan projects was crucial to avoid industry disruption, "so subbies and suppliers can keep on working on these jobs".

"We would be really concerned about the viability of some of these some of these subbies and suppliers and we'd be working with them closely to get them through this period," he said.

Renewed calls for trust accounts

The ACT Government last year announced a review of the security of payment scheme in the ACT, which would consider models for protection of payments to subcontractors.

The reforms included the proposed developer licensing scheme, more powers to make company directors personally liable for building defects, as well as higher standards for builders licence exams.

Mr O'Mara said project trust accounts, like those in other jurisdictions, would have helped blunt the financial blow of Banyan's failure.

Under the proposal, developers and builders would be required to set up trust accounts for each project.

The company's managing director, Liam Kelly's, phone has been disconnected. ( LinkedIn: Liam Kelly )

Money placed into the account could then only be spent on a specific project.

The accounts are designed to ensure contractors and subcontractors are still paid if a developer or builder goes into liquidation.

"At the moment, there's nothing stopping a builder, back financing projects or forward financing projects," Mr O'Mara said.

"We've seen many times where a developer will not pay subcontractors, not pay builders, because they're off buying their next block of land.

"Until they come into some more money, they don't pay anyone, so this thing really needs to be tightened up."

Mr O'Mara said a developer licensing scheme that did not include project trust accounts would be empty legislation.

"It's a matter of getting a government courageous enough to do the right thing by workers and subcontractors to whack them in," he said.

"We need 100 per cent of the money held in trust and people being accountable for paying their bills on time and for work that's been done appropriately."

But Mr Hopkins said similar schemes operating in Queensland and Western Australia had not prevented corporate collapses.

"While they might sound like an appealing solution, they often don't work," he said.

"But we would still be keen to explore all options to make sure that things like this don't happen in the future.

"We need to look beyond just project bank accounts and trust accounts and find other solutions to help this problem."