Statutory Demand: EXPLAINED

The Demands of Debt Collection

Ok, so you have been served with a Statutory Demand and want to know what to do next…

Read on below to find out more-

What is a Statutory Demand?

A Statutory Demand is a formal notice issued upon a company debtor by a creditor to collect a debt under Section 459E of the Corporations Act 2001. This is usually a warning to the company that the creditor is trying to obtain the monies that is owed to it. Failure to respond can lead to drastic consequences such as the winding up of your company via a Court order. The issue of a Stat Demand is often used as a vehicle to determine whether a company can pay its debt as and when they fall due.

What is a Debt?

Statutory Demands can only be issued when the debt is over $4,000.00 and must be due and payable. The Statutory Demand may specify the total amount that is owed to the creditor and provide details as to how these have arisen all in one Stat Demand.

What makes a Statutory Demand valid?

In order for the Statutory Demand to be constituted as valid:

  • It must be in writing;
  • Must specify the total amount of the debts that are ‘due and payable’;
  • It requires the company to pay the debt within 21 days after the company has been ‘served’;
  • Has it been executed by or on behalf of the creditor; and
  • It is in the correct form;
  • It must be accompanied by a Court judgment or an Affidavit in support

What does it mean when a company has been ‘served’ with a Statutory Demand?

If the Stat Demand is valid; the next question that will arise is whether it has been served correctly. If the following questions must be answered; to understand if your company has been ‘served’ correctly with a Statutory Demand:

  • Has the Stat Demand been left at a registered office of the company?
  • Does the Service and Execution of Process Act apply as the Statutory Demand will need to be served interstate?
  • Has the Stat Demand been sent via post to the registered office of the company?
  • Has the Statutory Demand been delivered personally to the director? The director must reside in Australia.
  • If the company has moved and the creditor is aware of the new address, has the company received the Statutory Demand at the new address?
  • If not known, has the Statutory Demand been served on the company director?

After the Stat Demand has been received, what is next?

  • The company must respond to the Statutory Demand within 21 days of service.
  • A debtor will be presumed insolvent if it does not apply to set aside the debt; or it fails to pay the debt. The creditor can rely on this ‘presumption of insolvency’ and apply to the Court to wind up the company.
  • This presumption of insolvency lasts for three months after the Stat Demand has been served.

Stay tuned for the next article in our Stat Demand series!

We would suggest that you seek legal advice on how to respond to a Stat Demand that has been served on your company to understand what the risks are if you do not respond and/or ways to see if it can be set aside.

At Green & Associates, we are experts in applying for no convictions and have an excellent success rate in achieving this for our clients. Regardless of the charge, we are ready to be in your corner and assist you during this uncertain time. If you or someone you know needs assistance with a defamation case, contact our office or book an appointment today.

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