A statutory demand is a formal demand served pursuant to s509H of the Corporations Act (2001).
If it is ignored for 21 days, then the company will be presumed insolvent, and any creditor can apply for the company to be wound up.
It is imperative that the Directors of companies understand the importance of these demands, and the need to act quickly when one is received.

The Supreme Court of Queensland ruled on 15 December 2011 that a statutory demand be set aside where the creditor told the debtor that they would not proceed to enforce the debt until an appeal was determined and more instructions given.
This means that if there is some agreement or representation by the creditor that the debt will not be enforced until a pre-condition is satisfied then any attempt to enforce that debt by statutory demand can be set aside pursuant to s459J(1)(b) of the Corporation Act which states: “On an application… the Court may by order set aside the demand if it is satisfied that… there is some other reason why the demand should be set aside.”
Legislation often has ‘catch-all’ provisions of this type; and this decision confirms that the Court will set aside a demand served where it is served after a debtor has been told that the creditor will not enforce the debt.
Irish Bentley have years of experience in enforcing statutory demands, and in having them set aside, being responsible for numerous reported decisions being handed down in this area of law alone.

The most important advice we can offer on statutory demands is this:

1. Contact an insolvency lawyer act as soon as you receive a demand because:
    
   1. The time frames are tight (21 days after they post the demand which means you either need to pay it, or engage a lawyer to apply to Court to have it set aside, and your lawyer will need at least one day to prepare everything).
   2. Service is by post (which is becoming increasingly unreliable – approximately 5% of mail delivered by Australia Post arrives late, or not at all).
   3. All the sender needs to prove is that they posted it (it does not matter whether you deny receiving it).
   4. If it is ignored for 21 days, then the company will be presumed to be insolvent, and any creditor can rely upon this to seek an Order that the company be wound up.
2. Appoint an insolvency based law Firm to be your registered office:
    
   1. to ensure that all demands are dealt within the required 21 days.
   2. to ensure that there is an accurate record of when all mail is received at your registered office, in case you need to refute service claims.
   3. To protect the Directors of your company against any Director’s Penalty Notices that may be served by the ATO if he company falls behind in its reporting or tax payment obligations.

The full text of the Corporations Act 2001 (Cth) is available here.

BTFB Plumbing Pty Ltd v Workers Compensation Nominal Defendant Insurer & Anor [2011] QSC 394

The solicitors at Irish Bentley Lawyers have insolvency law experience and qualifications.
We act as the registered office for many companies.