An entrepreneur who is also a contractor: when liability is not divided
Mar 31, 2026
By: Itzick Simon
Developer–Contractor Structures and Their Implications for the Implementation of the Regulations
Introduction
One of the most complex situations in applying the regulations arises when the same entity acts both as the client and as the contractor. This occurs in developer–contractor companies, in companies with mixed operations, and in groups where two separate arms—a development arm and a construction arm—operate within the same control structure.
From both a legal and operational perspective, this is a situation that requires heightened caution. The fact that it involves the same group, the same management, or the same controlling shareholders does not blur the obligations. On the contrary: it requires a precise distinction as to when the company is acting as the client and when it is acting as the contractor, and to ensure that each set of obligations is given real, documented, and separate expression.
The central risk in such a structure is the illusion of unity. In an integrated organization, it is very easy to assume that “everything is in-house,” and therefore that there is no real need for separations, approvals, information transfer, or independent oversight. This is precisely the point of failure. When the same entity wears both hats, the regulations do not diminish—they accumulate.
In other words:
In its role as the client, it must ensure a safety plan, allocate resources, and appoint a safety inspector.
In its role as the contractor, it must appoint a site manager (and, in relevant projects, also a site director), carry out reporting, implement the safety plan, and obtain written approval to commence work.
Where two sister companies are involved, or where a contractor subsidiary performs work for a developer parent company, there is a temptation to treat this as an “internal matter” that does not require regulation like a standard engagement. This is a mistake. Where corporate separation exists, it should be reflected in documentation, work interfaces, approval structures, resource allocation, and recordkeeping. Where no practical separation exists, the risk increases that, in the event of an incident, it will be argued that there was no real oversight, no functional independence, and no effective allocation of responsibility.
From a regulatory standpoint, the primary risk is the blurring of roles. From an insurance perspective, even where coverage may apply jointly to the same entity, such blurring can make it difficult to distinguish between the client’s liability and the contractor’s liability, and may affect how liability is assessed in a claim. In the investigation of an incident, this results in evidentiary ambiguity—a difficulty in demonstrating who acted, when, and in which capacity.
An entrepreneurial company that is also a contractor (same legal entity)
When the same company acts as both the client and the construction contractor, without corporate separation, all obligations set forth in the regulations apply to it simultaneously.
From a legal perspective, there is no distinction between "divisions" or "departments" within the company. The question is not how the company sees itself internally, but rather what hat it operates under at each stage of the project.
The practical meaning is that the company is required to simultaneously meet two sets of obligations:
In the role of the work orderer, she must ensure a safety plan, allocate resources, and appoint a safety controller.
In the role of the construction operator, it must appoint a foreman, and in relevant projects also a site manager, to prepare reports, implement the safety plan, and obtain written approval to begin work.
The main difficulty with such a structure is the lack of “natural friction” between parties. When there is no external party to criticize, demand, or approve, there is a natural tendency to skip steps, soften requirements, or not create a true separation of roles.
Even when it's the same company:
Written work commencement approval must be obtained, and not be satisfied with an undocumented internal decision.
Functional separation must be created between the approving entity (as the client) and the executing entity (as the contractor), even if both are within the same management.
Full documentation should be kept as if these were two separate parties.
When there is corporate separation, but the contractor actually performs only for the parent company, a sense of “internal activity” is created.
This is a misleading situation.
Despite the legal separation, in practice there is a full managerial and sometimes operational connection. The main risk is that the engagement is not managed as a true engagement between the parties.
The more corporate separation is not operationally expressed, the greater the risk that, in the event of an incident, it will be claimed that there was no real control, functional independence was not maintained, and there was no effective division of responsibility.
An entrepreneurial company that owns a subsidiary or affiliated company that is its contractor (performs only for it)
When the contracting company also works on projects for external developers, the complexity increases.
In such a situation, it is not possible to settle for a uniform and undifferentiated model. Each project must be examined separately: who is defined as the work commissioner, who is defined as the construction contractor, who appoints the officials, who communicates with whom and in what document, who provides the insurance, and how to ensure that the intra-group structure does not harm the independence of control.
The basic principle is simple: when the company acts as an operator for another entrepreneur, it is a contractor for all purposes, and all the rules that apply to a regular contract also apply to it.
What happens when the contracting subsidiary also performs for other entrepreneurs?
What happens when there are multiple contractors or split execution?
In complex projects, there may be a situation where there are multiple contractors or where the execution is divided into phases.
In such a situation, the question of who carries out the construction is not always clear-cut. The main risk is the creation of gaps between factors, loss of continuity of control, and undefined responsibility.
Interim summary
Regardless of the organizational or corporate structure, it is necessary to ensure:
Precise definition of ordering party and performing party
Separation of duties
Appointment of office bearers without interference
Full documentation
Alignment between the corporate, contractual and insurance structure and actual execution
The crucial question is not whether it is the same company, but whether it can be shown that the separation was actually maintained.
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