Statutory Demands

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Statutory demands force a debtor company to deal with a debt within 21 days of service of a Creditor’s statutory demand. If the debtor company does not act within 21 days, the company is presumed to be insolvent.

Once a debtor is presumed insolvent, a creditor can file proceedings with a Court seeking to appoint a liquidator to the company.

In most instances, a matter will settle within twenty-one days of the statutory demand being served.

What is a Statutory Demand?
The most cost effective method to compel a company to pay outstanding money is to issue a statutory demand.

A statutory demand is a legal document served upon a debtor which provides them with twenty one days to either:

(i) Pay or settle the debt or secure the debt to your satisfaction; or

(ii) Initiate Court proceedings to set aside the statutory demand by showing that either it has a genuine dispute about the debt, or an offsetting claim.

If there is no action within the twenty one days, the debtor is deemed to be insolvent and formal wind-up action can then commence. This process places tremendous pressure on the debtor to attend to your outstanding amount within twenty one days.

Can I issue a Statutory Demand?
In order to issue a statutory demand, there are a number of prerequisites, namely:

  1. The debtor must be a company;
  2. The debt must be for a minimum of $2,000.00; and
  3. There must be no genuine dispute or offsetting claim against the debt.

If you are unsure if your debt can be recovered by using a statutory demand, please contact us to discuss further.

 Why are proceedings necessary?
Once a statutory demand has expired, a creditor is entitled to apply to the Court for an Order winding up the debtor company and appointing a liquidator. Only the Court has power to grant these Orders.  Once a company is wound up a liquidator takes over all assets of the company. The directors of a liquidated company no longer have control of the company. Any funds left over will be distributed to unsecured creditors after the deduction of costs and secured claims.

What if the debtor company does not have anything?
It is common for directors of liquidated companies to suggest that the company has nothing and that there is no point to proceeding against a company.

These statements are in fact incorrect most of the time. The liquidator has power to reverse certain payments made by the debtor. Just because a debtor may have no cash at bank does not mean that a liquidator cannot recover money for the benefit of creditors.

Power to reverse previous transactions of the company
The liquidator has power to reverse some of the transactions made by the debtor up to four years prior to the company being wound up.  These may include:

1. Payments made to a relative or related entity of the directors of the company.

2. Payments made by the company to other creditors in preference to other creditors.

3. Transfers of company property to defeat creditors.

Monies recovered by the liquidator form a pool of funds which will be distributed to the company’s creditors.

If you are owed money from a company, please contact us on (07) 3891 3333 to discuss your options.
Zeke Bentley
For further information, please contact
Zeke Bentley of Irish Bentley Lawyers
on (07) 3891 3333
Zeke Bentley
Ph: +61 7 3891 3333
E-mail: zeke@irishbentley.com.au