Statutory Demands in Uncertain Times – A timely reminder

29 July 2008 Topics: Litigation and dispute resolution

Creditors are increasingly issuing statutory demands against a debtor company as a means of obtaining payment of outstanding debts of more than $2,000.

A statutory demand is an effective tool in the armoury of a creditor seeking payment from a company.

There are serious legal consequences for the debtor company if the statutory demand is inadvertently overlooked or ignored.

When a statutory demand is served, the debtor company has 21 days to:

  • pay the amount claimed;
  • secure payment of the debt to the creditor’s reasonable satisfaction; or
  • file and serve an application to set aside the statutory demand.

The 21-day period cannot be extended by the court.

A debtor company can seek to set aside a statutory demand where there is a genuine dispute as to the existence or the amount of the alleged debt or if the debtor company has an offsetting claim.

The debtor company will be deemed to be insolvent if it fails to do one of the three specified things within the 21-day period.

Where the debtor company fails to comply, the creditor can apply to wind up the debtor company. Other creditors can also join in the winding up application.

If you are served with a statutory demand it is imperative that you do not delay in obtaining legal advice. There may be options available to avoid a winding up application.

If a professional adviser whose business address is the registered office of a client receives a demand notice issued to the client, they must immediately bring it to the client’s attention.

Delay or failure to inform the client can have dire consequences as the 21-day time period commences the moment the statutory demand is served at the registered office irrespective of when the client is actually informed of it being served.

All companies should check to ensure the registered office details for the company are current and appropriate.

For more information regarding Statutory Demands, please contact a member of our Litigation & Dispute Resolution team on 07 3231 2444.

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This publication is for information only and is not legal advice. You should obtain advice that is specific to your circumstances and not rely on this publication as legal advice. If there are any issues you would like us to advise you on arising from this publication, please let us know.