The Corporations Act 2001 (“the Act”) provides for the conducting of business by a corporation in Australia.
Section 459E of the Act provides that a corporation may be served a statutory demand by a creditor (i.e. a creditor’s statutory demand) relating to (subsection 1):
(a) a single debt that the company owes to the person, that is due and payable and whose amount is at least the statutory minimum; or
(b) 2 or more debts that the company owes to the person, that are due and payable and whose amounts total at least the statutory minimum.
Once served with such a demand, a company cannot ignore the demand. The most serious of possible consequences for the company are now rolling out. There are no friendly rules or casual arrangements, strict compliance with the demand is necessary by law.
There are further other requirements such as:
(2) The demand:
(a) if it relates to a single debt–must specify the debt and its amount; and
(b) if it relates to 2 or more debts–must specify the total of the amounts of the debts; and
(c) must require the company to pay the amount of the debt, or the total of the amounts of the debts, or to secure or compound for that amount or total to the creditor’s reasonable satisfaction, within 21 days after the demand is served on the company; and
(d) must be in writing; and
(e) must be in the prescribed form (if any); and
(f) must be signed by or on behalf of the creditor.
(3) Unless the debt, or each of the debts, is a judgment debt, the demand must be accompanied by an affidavit that:
(a) verifies that the debt, or the total of the amounts of the debts, is due and payable by the company; and
(b) complies with the rules.
The key words above in each of the subsections are the words Must and AND.
The above requirements of the Act’s provisions are cumulative.
Skip any of the requirements and the consequences for the creditor’s demand is that it is potentially defective.
What happens next
Once a creditor’s statutory demand has been served upon a company, several things can happen:
- the recipient company pays the debt in full
the company contacts the creditor and they negotiate a settlement
the company applies to have the demand set aside – for instance if there has been a genuine disputing of the debt.
the company does not respond, and the creditor applies to have it wound up
If your company has received a creditor’s statutory demand, you have no time to waste. Go straight to our “what to do next blog” for further next steps – click here to book a free appointment, call us on 1300-327123 or complete the form below.
To view related blogs, follow the following category links and tags below.