A Statutory Demand is a formal demand made by a creditor on a debtor company to pay a debt within 21 days under S459E of the Corporations Act 2001. The debt must be for more than $2,000 and not be in a legitimate dispute.
A statutory demand is a very effective instrument for ascertaining whether a company can pay it’s debts as and when they fall due. A company is deemed to be insolvent if having received a statutory demand, it fails to pay the debt or have the demand set aside by a court within 21 days.
As debt collectors we can issue a Statutory Demand Notice for you.
If the company does not pay the debt in full or fails to have the demand set aside by the court within 21 days, the company is deemed to be trading insolvent and you have the right to make an application to place the company into liquidation.
A director has a positive duty to prevent insolvent trading under S588G of the Corporations Act 2001. There are various penalties and personal consequences for the director if found to be incurring debt while trading insolvent. These consequences can include civil penalties of up to $360,000, compensation proceedings and criminal charges, including imprisonment for up to 5 years.
As debt collectors we can guide you in these corporate insolvency matters.
It is a useful way to pressure a company to pay its debts
Many companies pay once being issued with a Statutory Demand as they do not want to be potentially placed into liquidation.
Company receiving a statutory demand is in a fight for its life
The company only has 21 days after being served with the Statutory Demand to pay or have it set aside by the court.
There may be personal consequences for the directors
Directors found to be incurring debts while trading insolvent can be made personally liable for the debts.
A company may be wound up if it is insolvent
After 21 days you can make an application to have the company wound up for trading insolvent.