February 4, 2016

10 Things You Need To Know About Creditors’ Statutory Demands

1. A Creditors’ Statutory Demand can be used by a creditor owed at least $2,000 by a company.

2. The debt must be due and payable – a common mistake is to issue a statutory demand for a debt (or part of a debt) which is not yet due. For example, the demand might include a number of outstanding invoices, but the most recent invoice issued to the debtor is not yet payable.

3. There must be no “genuine dispute” about the debt. If the parties are in dispute about the amount or existence of the debt, it may not be appropriate to issue a Creditors’ Statutory Demand.

4. The threshold to establish a “genuine dispute” can be easy to meet – often all that is required is “plausible contention requiring investigation”.

5. A mistake in a Creditors’ Statutory Demand, such as an incorrect address or misstatement of an amount, may be sufficient grounds to set aside the demand – care should be taken to ensure all information in the demand is correct.

6. The debtor has 21 days from the date of service, without exception, to either pay the debt or apply to the Court to set the demand aside.

7. Failure to pay the debt or set aside a Creditors’ Statutory Demand will result in the debtor company being presumed insolvent, and the creditor (or any 3rd party for that matter) may apply to wind the debtor company up due to insolvency.

8. To set aside a Creditors’ Statutory Demand, the debtor must satisfy the Court that a genuine dispute exists, the debtor has an offsetting claim, or there is a defect in the demand or some other good reason to set it aside.

9. Once the 21 days expires and the debtor company is presumed insolvent, the creditor must act upon the demand or it will expire and a new Creditors’ Statutory Demand must be issued.

10. NEVER ignore a Creditors’ Statutory Demand – if you receive a Creditors’ Statutory Demand you must act quickly; 21 days can be an extremely short time to settle a debt or prepare a Court application to apply to set the demand aside.

For our full article on Creditors’ Statutory Demands, click here.