Can I issue a statutory demand against a company for bad debts?

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A creditor who is owed money can issue a Statutory Demand pursuant to the Corporations Act 2001 (Act) requiring a company to pay a debt within 21 days of service.

The Act at Section 459E sets out the requirements for making a statutory demand. The demand:

  • must relate to a debt or debts that are due and payable and total at least $2,000
  • must specify the debt and its amount
  • must be in writing, in accordance with the prescribed form, which is Form 509H
  • must require compliance with the demand within 21 days after the demand is served on the company
  • must be signed by or on behalf of the creditor, and
  • if relying on a debt that is not a judgment debt, the demand must be accompanied by an affidavit that verifies the debt is due and payable to company and complies with the rules (Corporations Form 7 – Affidavit accompanying Statutory Demand). The affidavit verifying the Statutory Demand must not pre-date the Statutory Demand.

It is very important to remember that when you receive a statutory demand you do not ignore it as there are serious consequences for failing to respond. If you fail to comply with a Statutory Demand within the time provided, the company is presumed insolvent and an application can be made to wind up the company.

Once served you have 21 days to respond and you can either:

  • pay the demand, or
  • apply to the Court under s459G of the Corporations Act for an order that the demand be set aside.

If you challenge the Statutory Demand and apply to set it aside the court can do so if:

  • there is a genuine dispute as to the debt
  • the company has an offsetting claim
  • there is a defect in the demand that will cause substantial injustice unless the demand is set aside, or
  • for some other reason.

How can we help with a Statutory Demand?

Whether you want to serve a Statutory Demand or you want to defend it, our team has significant experience in this area and has acted for numerous creditors and companies who are seeking bad debts to be paid or defending a Statutory Demand. It is important to act swiftly. 

Contact our team today to discuss your options.

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