It is crucial, particularly during an office shutdown, that businesses implement protocols and check their mail, so that they are aware if a company is served with a creditor’s statutory demand at its registered office.
Where a company’s registered office is a place where the company does not carry on business, such as an accountant’s office, appropriate protocols need to be implemented to enable the company to be immediately informed of notices received at that address.
Statutory demand process
A creditor’s statutory demand is a debt collection tool commonly used by a creditor who is owed a debt of $2,000 or more. Service of a statutory demand is effected by serving it at the registered office of the company.
A failure to comply with a statutory demand could result in the recipient company being wound up.
The date of service of a statutory demand will be the date it is received at the registered office and not the date that it is subsequently brought to the attention of the recipient company’s director. A statutory demand can be served by post or by leaving it at the registered office of the company.
Importantly, the registered office does not need to be open at the time of service of the statutory demand.
Within 21 days of service of the statutory demand, the company must do one of the following:
- pay the amount claimed
- resolve the claim with the creditor
- file and serve an application under section 459G of the Corporations Act 2001 (Cth) to set aside the statutory demand.
If a company does not comply with the statutory demand within the 21 days, it is deemed to be insolvent and the creditor serving the statutory demand may proceed to wind up the company.
A company may be able to successfully challenge a statutory demand if there is a genuine dispute about the existence or amount of the alleged debt or the company has an offsetting claim.
The 21-day period to file and serve an application to set aside a statutory demand cannot be extended, so having sufficient time to prepare, file and serve the court application can be crucial.
Where a statutory demand has been served, the 21-day period begins to run regardless of whether the director(s) are aware of the statutory demand.
Losing time because you were not aware that the statutory demand was served can be catastrophic.
It is crucial that a company has appropriate protocols to record the date, time and method of service of legal demands and other notices to ensure that the company is immediately informed if a legal notice is received, particularly a statutory demand.
Particular care needs to be taken during an office shutdown or where the company’s registered office is a place where the company does not carry on business, such as an accountant’s office.
Where the accountant’s office is the registered office, the accountants also need to ensure that they have implemented procedures so that they can immediately inform a client if any communications for the client are received at the accountant’s office.
Appropriate procedures will also need to be implemented to check for communications received in the mail, received by electronic communication or left at the office.
Where your mail is redirected or being held at the post office, it is also important to ensure that you are checking the mail.
Whether a statutory demand can be challenged will depend on the facts of the matter.
If you receive a statutory demand, do not delay in obtaining legal advice. A company served with a statutory demand has only 21 days from the receipt of the statutory demand to comply.
If you would like more information regarding these issues, please contact Graham Roberts on +61 7 3231 2404 or another member of our litigation and dispute resolution team.