A Creditor’s Statutory Demand in Australia is a formal demand for payment of a debt owed by a company, issued under section 459E of the Corporations Act 2001. This demand is a critical legal tool used by creditors to recover debts and should not be taken lightly. Here are some key points about Creditor’s Statutory Demands:
1. Requirements for Issuing a Demand:
- The debt must be more than $4,000.
- The debt should be due and payable.
- The creditor must use Form 509H as prescribed by the Corporations Act 2001.
- An affidavit verifying the debt is owed and due is required.
2. Purpose of a Statutory Demand:
- It is an efficient and straightforward way to compel a debtor to pay what is owed.
- It places the debtor under pressure to resolve the issue within a tight 21-day window.
3. Response to a Statutory Demand:
- A debtor company has 21 days to either pay the demanded amount or apply to the Supreme Court to set it aside.
- Failure to respond within this period can lead to the presumption of insolvency and potential liquidation of the debtor company.
4. Grounds for Setting Aside a Demand:
- Existence of a genuine dispute about the debt.
- An offsetting claim against the creditor.
- Defect in the demand causing substantial injustice.
- Other valid legal reasons.
5. Consequences of Non-Compliance:
- Non-compliance within 21 days leads to an assumption of insolvency.
- This can trigger a winding-up application by the creditor, leading to the liquidation of the debtor company.
6. Winding Up Order:
- A winding-up order is usually made when a debtor company fails to comply with a statutory demand, indicating the company’s inability to pay its debts.
7. Legal Advice:
- It’s crucial for a company director receiving a statutory demand to seek legal advice immediately to formulate an appropriate response strategy.
This process underscores the importance of clear communication and prompt action in financial disputes between businesses.
