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What is a Statutory Demand?

A Statutory Demand is a demand made under 459E of the Corporations Act. This document is not issued by the Court. Failure to comply with a Statutory Demand or to apply to the Court to set it aside, will result in the company being “deemed” to be insolvent and provides the basis for an application to the Court for the winding up of the company.

A Statutory Demand requires that the Debtor Company pay a specified sum of money within 21 days from the date of the delivery of the demand on the Debtor Company.

If the debt is disputed or there are irregularities in the document, the company should immediately seek independent legal advice and apply to the Court to set the demand aside on the basis that the debt, the subject of the Statutory Demand, is genuinely disputed. This application MUST be made within 21 days.

          

What if the Statutory Demand expires unsatisfied?

Section 95(A) of the Corporations Act provides that a company is solvent if it is able to pay its debts as and when they fall due. Accordingly the test as to whether or not a company is insolvent is that it is not able to pay its debts when they fall due.

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

Accordingly the delivery to a Debtor Company and non-compliance with the Statutory Demand will provide “proof” which is sufficient for a creditor to apply to the Court for the appointment of a liquidator to the company.

 

Can the Statutory Demand just turn up in the post?

The Statutory Demand may be:

  • delivered (or served) by leaving a copy of the document at the registered office of the debtor company; or
  • Sent by post to the registered office of the debtor company; or
  • delivered personally to the directors who reside in Australia.

So yes, a Statutory Demand could just “turn-up” in the post and still be effective.

 

Explore the Fraud and Insolvency blogsite for real case studies.

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