What is a Statutory Demand?

A Statutory demand is a powerful business debt collection tool served on a debtor company by a creditor. Commonly used by the Australian Taxation Office, Workers Compensation Insurers and trade suppliers, a Section 459 Statutory Demand should not be ignored if received.

There are three options available to a company serviced with a demand:

  • Pay the amount demanded;
  • Reach a compromise with the creditor and have the creditor withdraw the demand in writing; or
  • Make an application under s459G of the Corporations Act 2001 to have the statutory demand set aside.

If the debt is to be disputed, the company should seek immediate legal advice and apply to the Court to set the demand aside on the basis that the debt is genuinely disputed.

The application must be made within 21 days from the date of service.

What happens if the Statutory Demand expires unsatisfied?

At the end of the 21 days after date of service, if a company has not responded with one of the actions above, the company is taken to have failed to comply with a Statutory Demand.

Under Section 459C of the Corporations Act the company is presumed to be insolvent if the company has failed to comply with the Statutory Demand.

From a debtor’s point of view, once the Statutory Demand’s time for compliance has expired there is no opportunity to contest the Statutory Demand, meaning the only way of dealing with the demand is to pay the debt. A company that would otherwise be solvent can find itself having to pay a debt they necessarily do not owe.

If you have received a Statutory Demand, it may be time to consider the financial position of the company and reassess. Directors of companies that are in fact trading insolvent, can leave themselves open to potential insolvent trading claims. If you have received a Statutory Demand you must act as soon as possible to ensure you act within the requirements of the Statutory Demand. Our lawyers at The Quinn Group can provide you with guidance and advice in regards to Statutory Demands. Submit an enquiry online at www.quinns.com.au or call us on 02 9223 9166.

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