From 1 July 2021 the threshold for issuing a Creditors Statutory Demand (CSD) has been increased from $2,000.00 to $4,000.00.
The Corporations Amendment (Statutory Minimum) Regulations 2021 (Cth) has been enacted and any party wanting to issue a CSD from 1 July 2021 can only issue it if the debt is over $4,000.00.
Creditors Statutory Demand – what are they?
In simple terms, it is a demand served by a creditor (a person company to whom money is owing) to a debtor (a company to who owes money).
If a debtor who owes you money and has no grounds to challenge the debt, then issuing a CSD is a simple and efficient way to require the debtor to pay the debt.
To issue a CSD you must:
- Prove the debt is over $4,000.00
- Prove debt is due and payable
- Use the correct form pursuant to the Corporations Act 2001 (Act)
- Have the Creditor or its representative swear an affidavit that the debt is due and payable
What are the benefits of issuing a Creditors Statutory Demand?
The benefits of issuing a CSD are:
- You do not have to issue court proceedings and get an order if the debt is indisputably payable
- It can include details of invoices and relevant documents
- You have a very tight time line to respond being 21 days
What happens if the debtor fails to pay or challenge the CSD within the 21 days?
Section 459E of the Act gives the debtor 21 days to respond.
They can either pay the money or apply to the Court to set aside the CSD.
A debtor can only challenge the CSD on the basis:
- There is a genuine dispute about the debt
- There is a claim to offset against the creditor
- It is defective and will causing substantial injustice to a debtor unless it is set aside
If the debtor does not pay the debt or set the CSD aside then the debtor is deemed insolvent pursuant to the Act and can order the debtor to be wound up.
What do I do if I get a Creditors Statutory Demand served on my company?
Do not ignore it is the most important piece of advice as it can have catastrophic consequences to your company.
If you believe there is a genuine dispute, then seek legal advice.
How can FC Lawyers help?
Our expert team has acted for both creditors issuing CSDs and debtor companies who have been served with them.
It is important to act swiftly and decisively so contact our team for an obligation free discussion to see how we can help.
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