How long does a statutory demand last?

Once served a debtor company has 21-days to comply, set aside, or request a withdrawal of the demand. If they fail to do so then this raises the legal presumption that they are insolvent. There is a three-month time limit to presumption of insolvency. This means that the presumption of insolvency last for three months, starting on the 22nd day. A creditor can apply to wind up the company within that three-month period and gain the benefit of that legal presumption. The most common reason for company liquidation is insolvency.

Can you Withdraw a Statutory Demand?

Yes, a statutory demand can be withdrawn. As above, a statutory demand can be withdrawn both orally and in writing, however a debtor must always ensure that they have it in writing in case they need to rely on the withdrawal. All you have to do is ask the issuer to withdraw the statutory demand, explain why the debtor wants it withdrawn (usually a genuine dispute), and the issuer should withdraw the statutory demand. If there is a real reason for the demand to be set aside, and the issuer is told about that reason and asked to withdraw the demand – if they do not, then they could be ordered to pay the costs of the debtor’s application to set the demand aside.

Can a statutory demand be withdrawn?

Yes. If a debtor company has grounds to set a statutory demand aside then they can request that the demand be withdrawn. If the issuer does not withdraw the demand, and the debtor company is successful in obtaining an order setting it aside, then the issuer may be ordered to pay the costs of the application. An issuer should give serious consideration to withdrawing the demand if there are reasonable grounds.

What do I do if I receive a statutory demand?

As quickly as possible you should contact a statutory demand lawyer. You can do any of the following: Pay the total amount of the debt(s); Secure or compound for the debt to the creditor’s reasonable satisfaction; Ask the issuer to withdraw the demand; or Apply to the Court for an order setting the demand aside. If you fail to do these things within 21 days, then it could have very serious consequences.

How Do You Serve a Statutory Demand?

A statutory demand is not an originating document and so there is no need for personal service. A demand is served correctly if served in accordance with section 109X of the Corporations Act. The most common way that service of a demand is effected is by mailing it to the registered office of the debtor company by pre-paid post. However, a demand can also be served by leaving it at the registered office, or personally delivering it on the director of the company.

Can a Statutory Demand be Served by Post?

Yes, a statutory demand is usually served by post. It is the most common way to serve a stat demand. Section 109X of the Corporations Act says that “… a document may be served on a company by … posting it to, the company’s registered office”. As mentioned above, obtain a company extract from ASIC and send all of the documents by express post to the registered office. Once delivered, annex the delivery receipt to your affidavit. Alternatively, a creditor can rely of the Postal Rule contained in section 160(1) of the Evidence Act 1995 (CTH) which states that a postal article sent by prepaid post is deemed received at that address on the seventh working day after having been posted.

Can you Serve a Statutory Demand on a Company?

You can only serve a statutory demand on a company. If you have a human debtor, then you will need to obtain a judgment and issue the debtor with a bankruptcy notice. A bankruptcy notice is essentially the human version of a statutory demand. Statutory demands can only be served on companies to recover debts owed by a company.

What is the Meaning of Deemed Service?

Deemed service occurs when service is made in accordance with section 109X of the Corporations Act and/or section 9 of the Service and Execution of Process Act 1992. Deemed essentially means “regarded” or “considered”. So, a statutory demand is regarded as served, or considered served, when it is effectively served as outlined above.

Can a Statutory Demand be Served by Email?

No, a statutory demand cannot be served by email. Service of a statutory demand must be in accordance with section 109X of the Corporations Act and/or section 9 of the Service and Execution of Process Act 1992. Service is usually effected by posting the documents to the registered office of the company or delivering a copy of it personally to a director of the company who resides in Australia.

How can I get money owed to me?

After service of a statutory demand on the debtor company they only have 21 days to pay the debt or secure or compound for the debt. In our experience a debtor company that can raise funds will usually do so rather than the risk of being wound up and a liquidator appointed. So, they will either pay, or attempt to compound for the debt with some security. Either way this is the way that a creditor will get paid.

What is a winding up order?

A winding up order is an order from the Court that the debtor company we wound up in insolvency. A winding up order will appoint a liquidator and make an order as to costs of the winding up application.

Can I issue a statutory demand?

To be eligible to issue a statutory demand you must satisfy the requirements below: You must be a creditor of the company; The debt must be $2,000.00 or more; The debt must be due and payable at the time of issue; and There should not be any genuine dispute. If you tick “yes” to the above, then you are eligible to issue a statutory demand.

What is Considered a Debt?

A debt for a statutory demand is most commonly a liquidated amount that is presently due and payable by the debtor to the creditor. In most cases this is a debt relating to goods and/or services provided to the debtor company by the creditor and not paid for. Unliquidated debts, prospective or contingent debts are not debts which allow a creditor to issue a statutory demand.

What is the Amount of Debt Being Claimed?

The minimum debt amount of $2,000.00 is required for a creditor to be eligible to issue a statutory demand for payment. So if a creditor has a debt equal to or more than $2,000.00, or has a number of debts equal to or more than $2,000.00 then a creditor can issue a statutory demand.

What is the Statutory Demand Limit?

The statutory demand limit is $2,000.00. This is a minimum threshold, there is no maximum amount that can be claimed in a statutory demand. Section 9 of the Corporations Act defines a statutory minimum as: “statutory minimum” means: (a) if an amount greater than $2,000 is prescribed – the prescribed amount; or (b) otherwise–$2,000.

What Form Should a Statutory Demand Take?

A statutory demand must comply substantially with the form 509H. Although there is extensive case law allowing demands which are not exactly in the correct form, best practice is to ensure that it is in the correct form. It is very simple to simply edit the Form 509H or the Form 7 Affidavit. It is important to ensure that it is all correctly complied with. However, a creditor must ensure that the following requirements for a valid statutory demand are completed correctly: The debtor and creditor details including ACN; The registered office and address of the debtor company; Correct and sufficient particularisation of the debt; The statement that the debt is due and payable; and The statement that the debt remains outstanding. Who can Sign Statutory Demand? A statutory demand should be signed by a creditor, a director or CFO of a creditor company, or the solicitor of the creditor. Section 459E(2)(f) of the Corporations Act says that the demand is to “be signed by or on behalf of the creditor”. Further, the person signing must know that the debt is due and payable and their belief that there is no genuine dispute about the existence or amount of the debt. Therefore, it is not likely to be accepted if signed by a low-level employee. Best practice – get the statutory demand signed by the solicitor or by a director of the company. If there is more than 1 director, ensure that there is a meeting and a minute giving authority to the signing director to sign on behalf of the company.

What are the Implications of Ignoring a Statutory Demand?

If a debtor company ignores the statutory demand, then there are two main implications: The debtor company is presumed to be insolvent which assists the creditor in the winding up application, or will put the debtor company to considerable costs attempting to resist the winding up application; and Section 549S says that the company is likely unable to rely on the matter it could have relied on if setting aside the demand, when resisting the winding up application. If there was a genuine dispute, etc. then the company may not be given leave to raise it.

Can the 21 days in which to comply with a Statutory Demand be extended?

If the 21-day time for compliance with the demand has passed the Courts have been very clear that the Court cannot extend the time for compliance. If an application to set the demand aside has been correctly drafted, filed, sealed, and served in time, then the Courts can order that the debtor company have some more time to comply with the demand. In all other instances the Courts have ruled that strict compliance with the 21-day time limit is required or it is unable to be extended.

Do I need a Judgment or Affidavit to make a Statutory Demand?

A creditor can issue a statutory demand with either a judgment in support or an affidavit in support. If you have been through the Courts and obtained a judgment; or you have been through QCAT or adjudication, and the QCAT decision or adjudication decision has been registered in the Court; then you can issue a statutory demand. However, you can also serve a statutory demand with an affidavit in support. The affidavit must be in the required Form 7 and swear/affirm to all of the requirements needed.

Can a Statutory Demand be used for Part of a Debt?

In the decision of Commonwealth Bank of Australia v Garuda Aviation Pty Ltd [2013] WASCA 61 the Western Australia Court of Appeal found that a statutory demand could be issued for an undisputed portion of a debt, so long as the undisputed portion exceeds the statutory minimum. The Court of Appeal did however caution that it may be an abuse of process to serve multiple statutory demands for various parts of a single debt in the absence of good reasons for doing so.

What is the Presumption of Insolvency if Demand is Unpaid?

A legal presumption shifts the burden of proof. The legal presumption of insolvency means that a creditor does not have to prove that the debtor is insolvent. It becomes the job of the debtor company to prove solvency.

How Long is a Statutory Demand Valid For?

A statutory demand is valid for three (3) months. Once served the debtor company has 21 days to do what is required of them, pay the debt, secure or compound for the debt, or apply to set it aside. They can also ask for it to be withdrawn. If they do none of these things, then they are presumed to be insolvent. It is with this legal presumption of insolvency assisting that the creditor can take steps to wind them up in insolvency. This presumption of insolvency lasts for three (3) months. If the creditor does not take steps to wind the debtor company up in insolvency within this three (3) month period, then they are unable to rely on the legal presumption of insolvency raised by non-compliance with the demand.

How long does a Creditor have to Lodge a Winding up Application?

One of the only requirements to make an application for a winding up order is that the issuer be a creditor of the debtor company. Section 462(2)(b) of the Corporations Act 2001 says: Any one or more of the following may apply for an order to wind up a company: (b) a creditor … of the company However, without the presumption of insolvency to assist, it may be more difficult and more expensive to get the Court to make the order. If the debtor does not comply with the statutory demand, then they are presumed to be insolvent. This presumption of insolvency lasts for three (3) months in which time the creditor can apply to wind the company up.

How long does a statutory demand last?

Once served a debtor company has 21-days to comply, set aside, or request a withdrawal of the demand. If they fail to do so then this raises the legal presumption that they are insolvent. There is a three-month time limit to presumption of insolvency. This means that the presumption of insolvency last for three months, starting on the 22nd day. A creditor can apply to wind up the company within that three-month period and gain the benefit of that legal presumption. The most common reason for company liquidation is insolvency.

Can you Withdraw a Statutory Demand?

Yes, a statutory demand can be withdrawn. As above, a statutory demand can be withdrawn both orally and in writing, however a debtor must always ensure that they have it in writing in case they need to rely on the withdrawal. All you have to do is ask the issuer to withdraw the statutory demand, explain why the debtor wants it withdrawn (usually a genuine dispute), and the issuer should withdraw the statutory demand. If there is a real reason for the demand to be set aside, and the issuer is told about that reason and asked to withdraw the demand – if they do not, then they could be ordered to pay the costs of the debtor’s application to set the demand aside.

Can a statutory demand be withdrawn?

Yes. If a debtor company has grounds to set a statutory demand aside then they can request that the demand be withdrawn. If the issuer does not withdraw the demand, and the debtor company is successful in obtaining an order setting it aside, then the issuer may be ordered to pay the costs of the application. An issuer should give serious consideration to withdrawing the demand if there are reasonable grounds.

What do I do if I receive a statutory demand?

As quickly as possible you should contact a statutory demand lawyer. You can do any of the following: Pay the total amount of the debt(s); Secure or compound for the debt to the creditor’s reasonable satisfaction; Ask the issuer to withdraw the demand; or Apply to the Court for an order setting the demand aside. If you fail to do these things within 21 days, then it could have very serious consequences.

How Do You Serve a Statutory Demand?

A statutory demand is not an originating document and so there is no need for personal service. A demand is served correctly if served in accordance with section 109X of the Corporations Act. The most common way that service of a demand is effected is by mailing it to the registered office of the debtor company by pre-paid post. However, a demand can also be served by leaving it at the registered office, or personally delivering it on the director of the company.

Can a Statutory Demand be Served by Post?

Yes, a statutory demand is usually served by post. It is the most common way to serve a stat demand. Section 109X of the Corporations Act says that “… a document may be served on a company by … posting it to, the company’s registered office”. As mentioned above, obtain a company extract from ASIC and send all of the documents by express post to the registered office. Once delivered, annex the delivery receipt to your affidavit. Alternatively, a creditor can rely of the Postal Rule contained in section 160(1) of the Evidence Act 1995 (CTH) which states that a postal article sent by prepaid post is deemed received at that address on the seventh working day after having been posted.

Can you Serve a Statutory Demand on a Company?

You can only serve a statutory demand on a company. If you have a human debtor, then you will need to obtain a judgment and issue the debtor with a bankruptcy notice. A bankruptcy notice is essentially the human version of a statutory demand. Statutory demands can only be served on companies to recover debts owed by a company.

What is the Meaning of Deemed Service?

Deemed service occurs when service is made in accordance with section 109X of the Corporations Act and/or section 9 of the Service and Execution of Process Act 1992. Deemed essentially means “regarded” or “considered”. So, a statutory demand is regarded as served, or considered served, when it is effectively served as outlined above.

Can a Statutory Demand be Served by Email?

No, a statutory demand cannot be served by email. Service of a statutory demand must be in accordance with section 109X of the Corporations Act and/or section 9 of the Service and Execution of Process Act 1992. Service is usually effected by posting the documents to the registered office of the company or delivering a copy of it personally to a director of the company who resides in Australia.

How can I get money owed to me?

After service of a statutory demand on the debtor company they only have 21 days to pay the debt or secure or compound for the debt. In our experience a debtor company that can raise funds will usually do so rather than the risk of being wound up and a liquidator appointed. So, they will either pay, or attempt to compound for the debt with some security. Either way this is the way that a creditor will get paid.

What is a winding up order?

A winding up order is an order from the Court that the debtor company we wound up in insolvency. A winding up order will appoint a liquidator and make an order as to costs of the winding up application.

Can I issue a statutory demand?

To be eligible to issue a statutory demand you must satisfy the requirements below: You must be a creditor of the company; The debt must be $2,000.00 or more; The debt must be due and payable at the time of issue; and There should not be any genuine dispute. If you tick “yes” to the above, then you are eligible to issue a statutory demand.

What is Considered a Debt?

A debt for a statutory demand is most commonly a liquidated amount that is presently due and payable by the debtor to the creditor. In most cases this is a debt relating to goods and/or services provided to the debtor company by the creditor and not paid for. Unliquidated debts, prospective or contingent debts are not debts which allow a creditor to issue a statutory demand.

What is the Amount of Debt Being Claimed?

The minimum debt amount of $2,000.00 is required for a creditor to be eligible to issue a statutory demand for payment. So if a creditor has a debt equal to or more than $2,000.00, or has a number of debts equal to or more than $2,000.00 then a creditor can issue a statutory demand.

What is the Statutory Demand Limit?

The statutory demand limit is $2,000.00. This is a minimum threshold, there is no maximum amount that can be claimed in a statutory demand. Section 9 of the Corporations Act defines a statutory minimum as: “statutory minimum” means: (a) if an amount greater than $2,000 is prescribed – the prescribed amount; or (b) otherwise–$2,000.

What Form Should a Statutory Demand Take?

A statutory demand must comply substantially with the form 509H. Although there is extensive case law allowing demands which are not exactly in the correct form, best practice is to ensure that it is in the correct form. It is very simple to simply edit the Form 509H or the Form 7 Affidavit. It is important to ensure that it is all correctly complied with. However, a creditor must ensure that the following requirements for a valid statutory demand are completed correctly: The debtor and creditor details including ACN; The registered office and address of the debtor company; Correct and sufficient particularisation of the debt; The statement that the debt is due and payable; and The statement that the debt remains outstanding. Who can Sign Statutory Demand? A statutory demand should be signed by a creditor, a director or CFO of a creditor company, or the solicitor of the creditor. Section 459E(2)(f) of the Corporations Act says that the demand is to “be signed by or on behalf of the creditor”. Further, the person signing must know that the debt is due and payable and their belief that there is no genuine dispute about the existence or amount of the debt. Therefore, it is not likely to be accepted if signed by a low-level employee. Best practice – get the statutory demand signed by the solicitor or by a director of the company. If there is more than 1 director, ensure that there is a meeting and a minute giving authority to the signing director to sign on behalf of the company.

What are the Implications of Ignoring a Statutory Demand?

If a debtor company ignores the statutory demand, then there are two main implications: The debtor company is presumed to be insolvent which assists the creditor in the winding up application, or will put the debtor company to considerable costs attempting to resist the winding up application; and Section 549S says that the company is likely unable to rely on the matter it could have relied on if setting aside the demand, when resisting the winding up application. If there was a genuine dispute, etc. then the company may not be given leave to raise it.

Can the 21 days in which to comply with a Statutory Demand be extended?

If the 21-day time for compliance with the demand has passed the Courts have been very clear that the Court cannot extend the time for compliance. If an application to set the demand aside has been correctly drafted, filed, sealed, and served in time, then the Courts can order that the debtor company have some more time to comply with the demand. In all other instances the Courts have ruled that strict compliance with the 21-day time limit is required or it is unable to be extended.

Do I need a Judgment or Affidavit to make a Statutory Demand?

A creditor can issue a statutory demand with either a judgment in support or an affidavit in support. If you have been through the Courts and obtained a judgment; or you have been through QCAT or adjudication, and the QCAT decision or adjudication decision has been registered in the Court; then you can issue a statutory demand. However, you can also serve a statutory demand with an affidavit in support. The affidavit must be in the required Form 7 and swear/affirm to all of the requirements needed.

Can a Statutory Demand be used for Part of a Debt?

In the decision of Commonwealth Bank of Australia v Garuda Aviation Pty Ltd [2013] WASCA 61 the Western Australia Court of Appeal found that a statutory demand could be issued for an undisputed portion of a debt, so long as the undisputed portion exceeds the statutory minimum. The Court of Appeal did however caution that it may be an abuse of process to serve multiple statutory demands for various parts of a single debt in the absence of good reasons for doing so.

What is the Presumption of Insolvency if Demand is Unpaid?

A legal presumption shifts the burden of proof. The legal presumption of insolvency means that a creditor does not have to prove that the debtor is insolvent. It becomes the job of the debtor company to prove solvency.

How Long is a Statutory Demand Valid For?

A statutory demand is valid for three (3) months. Once served the debtor company has 21 days to do what is required of them, pay the debt, secure or compound for the debt, or apply to set it aside. They can also ask for it to be withdrawn. If they do none of these things, then they are presumed to be insolvent. It is with this legal presumption of insolvency assisting that the creditor can take steps to wind them up in insolvency. This presumption of insolvency lasts for three (3) months. If the creditor does not take steps to wind the debtor company up in insolvency within this three (3) month period, then they are unable to rely on the legal presumption of insolvency raised by non-compliance with the demand.

How long does a Creditor have to Lodge a Winding up Application?

One of the only requirements to make an application for a winding up order is that the issuer be a creditor of the debtor company. Section 462(2)(b) of the Corporations Act 2001 says: Any one or more of the following may apply for an order to wind up a company: (b) a creditor … of the company However, without the presumption of insolvency to assist, it may be more difficult and more expensive to get the Court to make the order. If the debtor does not comply with the statutory demand, then they are presumed to be insolvent. This presumption of insolvency lasts for three (3) months in which time the creditor can apply to wind the company up.

How long does a statutory demand last?

Once served a debtor company has 21-days to comply, set aside, or request a withdrawal of the demand. If they fail to do so then this raises the legal presumption that they are insolvent. There is a three-month time limit to presumption of insolvency. This means that the presumption of insolvency last for three months, starting on the 22nd day. A creditor can apply to wind up the company within that three-month period and gain the benefit of that legal presumption. The most common reason for company liquidation is insolvency.

Can you Withdraw a Statutory Demand?

Yes, a statutory demand can be withdrawn. As above, a statutory demand can be withdrawn both orally and in writing, however a debtor must always ensure that they have it in writing in case they need to rely on the withdrawal. All you have to do is ask the issuer to withdraw the statutory demand, explain why the debtor wants it withdrawn (usually a genuine dispute), and the issuer should withdraw the statutory demand. If there is a real reason for the demand to be set aside, and the issuer is told about that reason and asked to withdraw the demand – if they do not, then they could be ordered to pay the costs of the debtor’s application to set the demand aside.

Can a statutory demand be withdrawn?

Yes. If a debtor company has grounds to set a statutory demand aside then they can request that the demand be withdrawn. If the issuer does not withdraw the demand, and the debtor company is successful in obtaining an order setting it aside, then the issuer may be ordered to pay the costs of the application. An issuer should give serious consideration to withdrawing the demand if there are reasonable grounds.

What do I do if I receive a statutory demand?

As quickly as possible you should contact a statutory demand lawyer. You can do any of the following: Pay the total amount of the debt(s); Secure or compound for the debt to the creditor’s reasonable satisfaction; Ask the issuer to withdraw the demand; or Apply to the Court for an order setting the demand aside. If you fail to do these things within 21 days, then it could have very serious consequences.

How Do You Serve a Statutory Demand?

A statutory demand is not an originating document and so there is no need for personal service. A demand is served correctly if served in accordance with section 109X of the Corporations Act. The most common way that service of a demand is effected is by mailing it to the registered office of the debtor company by pre-paid post. However, a demand can also be served by leaving it at the registered office, or personally delivering it on the director of the company.

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Sunshine Coast

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