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.