What you need to know if you have received a statutory demand

3 minutes reading time

Table of Contents

If you:

  • operate a company;
  • owe someone at least $4,000; and
  • have not paid them,

you may receive a statutory demand for payment.

So what do you need to know if you’ve received a statutory demand for payment?

What is a statutory demand?

A statutory demand is a written demand made to a company by a creditor under section 459E of the Corporations Act 2001 (Cth).

A statutory demand can be made by a person who is owed one or more debts totalling more than the statutory minimum. As at the date of this article, the statutory minimum is $4,000.

Once a statutory demand has been served, a company has 21 days to:

  • pay the debt;
  • apply to set aside the statutory demand.

What happens if a company does not comply with a statutory demand?

If a company fails to comply with a statutory demand, the company is presumed insolvent under the Corporations Act 2001 (Cth).

Within three months of the date of non-compliance, any creditor (not just the one that served the company with a statutory demand) may rely on the presumption of insolvency as the basis for making an application to the court for the company to be wound up.

If an application to the court is made, the court will presume, unless evidence is produced to the contrary, that the company is insolvent and should be wound up.

Where the company is wound up, the court will appoint a liquidator to take control of the company.

What can you do once you’ve been served with a statutory demand?

A company that has been served with a statutory demand may, depending on the circumstances, be able to apply to the court for an order setting aside the statutory demand.

The court may set aside a statutory demand for a number of reasons, including where it is satisfied that:

  • there is a defect in the statutory demand which could cause substantial injustice;
  • there is a genuine dispute about the existence or amount of the debt to which the demand relates to; or
  • the company has a counter claim or cross claim against the person that issued the statutory demand.

An application seeking to set aside a statutory demand must be made within 21 days of the company being served with the statutory demand.

Click here if you want to know more about Insolvency, Bankruptcy and Restructuring.

How we can help

  • Prepare and respond to statutory demands
  • Appoint a trusted administratorreceivermanager or liquidator to work through the issues in the company
  • Commence (and defend) winding up applications
  • Implement streamlined operations to prevent and minimise insolvency, trading and operating risks
  • Advise on safe harbour arrangements and insolvent trading provisions so that you can protect your company