Statutory Demand

A statutory demand is a demand for payment under section 459E of the Corporations Act 2001 (Cth).

If an insolvent debtor company owes you a debt over $2,000.00 then you can serve them with a statutory demand.

If you have a judgment debt over a debtor company then you can enforce that judgment with a statutory demand.

The debtor company then has 21 days to comply with the demand or attempt to set it aside.

Failure to pay, secure or compound for the debt, or apply to set it aside will result in a legal presumption that the company is insolvent.

With the assistance of this presumption of insolvency, a creditor is then able to take steps to wind the company up in liquidation, where all of the company’s assets can be sold to satisfy the creditors.

If a insolvent debtor company refuses to pay, you can serve a statutory demand. Care should be taken when drafting the demand as a defect in the demand could allow the demand to be set-aside

What we do with Statutory Demands

If you are owed a debt of $2,000.00 of more by an insolvent company then our statutory demand lawyers can draft and serve that debtor company with statutory demands.

If you have been served with a demand then we can attempt to get that demand set aside.  If you have been served and are wanting to get a demand set aside, then read our page – Setting Aside a demand.

Drafting & Serving a Statutory Demand

If a company owes you a debt, or debts, of more that the statutory demand statutory minimum, which at the time of writing this, section 9 of the Corporations Act 2001 (Cth) says:

“statutory minimum ” means:
(a) if an amount greater than $2,000 is prescribed–the prescribed amount; or
(b) otherwise–$2,000.

If you are owed a debt or debts from a company of over $2,000.00 then you have satisfied the main threshold issue, allowing you to proceed.

The demand must be in the prescribed form.  It is vital that this is done correctly, as one of the ways that a debtor can apply to set aside a demand is that there are formal defects in the demand.

The prescribed form of a statutory demand is statutory demand form 509h outlined in schedule 2 of the Corporations Regulations 2001 (Cth).

It is vitally important that the form is completed correctly.  The Courts do not lightly order a company into liquidation, and so the procedure should be given the respect that it deserves.

Also, if this is the cause of action you wish to pursue, it is vital that the t’s are crossed and the i’s are dotted to ensure your best chances.

Evidence Needed to Accompany the Statutory Demand

Once the statutory demand is drafted, it is a requirement under section 459E subsection (3) that:

(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.

This means that the debt must be accompanied by a judgment, or an affidavit.  It is vital that the affidavit is drafted correctly and complied with the rules.  Failure to do so may mean that the demand could be set aside.

Serving your Demand for Payment

You have complied with all of the requirements above, now you have to serve the demand.

Service on a company can be done in a number of different ways as prescribed by section 109X of the Corporations Act 2001 (Cth), which says:

(1) For the purposes of any law, a document may be served on a company by:
(a) leaving it at, or posting it to, the company’s registered office; or
(b) delivering a copy of the document personally to a director of the company who resides in Australia or in an external Territory.

It is vital that service of your demand is made correctly, and that service is evidenced in an affidavit of service.  Once again, failure to do any of these things can result in your demand being set aside.

A company’s registered office address is available on a company extract from the Australian Securities and Investments Commission (ASIC).

If you are serious about recovering your debt from this company then we advise that you instruct us to do both options mentioned in section 109X – by post and personal service on the company director.

What Happens Now?

To ensure you have complied with all of the above, we strongly suggest instructing us to draft and serve your statutory demand.

If the Court is satisfied that all of the above have been complied with, then upon an application to the Federal Court (or Supreme Court) they will likely make an order that the company be wound up in liquidation.

However, in our experience, a company that has the means to prevent being wound-up will likely take steps to avoid that from happening, by repaying the debt for example.

Why Get Professional Legal Advice

At Stonegate Legal we offer the best fixed fee services for drafting and serving documents.

If any of the stages are not done correctly, then the debtor company can attempt to set the demand aside, leaving you right back at the start again.

Or, if there are grounds, attempt to get you to withdraw the demand.

If they do nothing, and you attempt to make the application to wind-up the company with insufficient documents, then you may lose the costs of making the application, or may be ordered to pay the costs of the hearing of the application.

A reasonable fixed-fee at the beginning of the matter, can save a lot of costs at the end.

If a insolvent debtor company refuses to pay, you can serve a statutory demand. Care should be taken when drafting the demand as a defect in the demand could allow the demand to be set-aside