Good morning Everyone
Statutory Demands – A Powerful Debt Recovery Tool when the debtor is a company
Many businesses are unaware that the Corporations Act 200 provides a fast and effective method of recovering undisputed debts from companies through the use of a Statutory Demand.
A properly prepared statutory demand can often result in prompt payment without the need to commence lengthy court proceedings.
A statutory demand is a formal written demand issued under Part 5.4 of the Corporations Act 2001 requiring a company to pay a debt that is due and payable. It must comply strictly with the requirements as set out in the Corporations Act. It can only be used in the following circumstances:
- Where the debtor is a company registered under the Corporations Act;
- the debt is presently due and payable and is more than the statutory minimum which is currently $4,000.00; and
- there is no genuine dispute about the existence or amount of the debt.
Unlike ordinary debt collection letters, a statutory demand carries significant legal consequences as if the debtor does not respond in the statutory period of 21 days, it allows the issuer to commence winding up the debtor company, as it is deemed to be insolvent.
Upon receiving a statutory demand that is in accordance with the requirements, the debtor company has the following avenues open, from 21 days of receipt, as follows:
- pay the debt in full;
- negotiate a settlement;
- secure or compound the debt to the creditor’s satisfaction; or
- apply to the Court to set aside the demand.
Any application to set aside the demand must be filed and served within the 21-day period. The Court has no power to extend this time limit.
Where the debt is disputed, ordinary court proceedings are generally the appropriate course.
I have assisted many clients both in issuing successful statutory demands and being able to identify grounds to have them set aside. If you have been served, you must act urgently as missing the 21-day deadline can have serious consequences, including an application to wind up the company. I am able to assist in:
- preparing and serving statutory demands;
- responding to statutory demands;
- drafting and filing applications to set aside statutory demands;
- undertake debt recovery litigation;
- drafting and filing applications for winding-up proceedings; and
- assisting in commercial dispute resolution.
Whether you are seeking payment of an undisputed debt or have received a statutory demand, I am able to provide prompt legal advice which can significantly improve your position. If you or someone you know needs such assistance, please contact me to arrange a confidential consultation.
Wishing you a wonderful day,
Jeffrey Choy
JCL Legal
0419 233 670
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Legal Disclaimer: This guide is for informational purposes only and does not constitute legal advice.