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Statutory demands and how you can utilise them to recover a debt

Statutory demands are one of the options available to creditors to recover any outstanding money they are owed. If you are faced with a situation where a company has failed to pay you for your goods and/or services, you may be able to rely on a statutory demand to recover the debt.

What is a Statutory Demand?

A statutory demand is a document issued by a creditor that allows them to demand payment from a debtor company. The debtor company is required to pay the debt outlined in the demand within 21 days (subject to COVID-19 temporary changes), or apply to set aside the statutory demand, otherwise the debtor will be deemed insolvent. Being deemed insolvent has great implications for a company as the court may order for the company to be wound up.

Type of Debt

Pursuant to section 459E(1)(a) of the Corporations Act 2001 (Cth) (the Corporations Act), to be able to rely on a statutory demand, the debt must be over $2,000.00 (subject to COVID-19 temporary changes), undisputed, due and payable. Therefore, debts that are potential, contingent or unliquidated cannot be claimed.

Requirements of a Valid Statutory Demand

It is important that the statutory demand is completed correctly; otherwise the claim for the debt may fail. Section 459E of the Corporations Act sets out the requirements for making a valid statutory demand.

A statutory demand must:

(a) specify the debt and its amount, or if its two or more debts specify the total combined amount of debt owed;
(b) require the debtor company to pay the amount of debt within 21 days once the statutory demand is served on the debtor (subject to COVID-19 temporary changes);
(c) be in writing and in the prescribed form, which is Form 509H;
(d) be signed by or on behalf of the creditor; and
(e) be accompanied by an affidavit which verifies the debt is due and payable if the debt is not a judgement debt.

Service

The time limit of 21 days (subject to COVID-19 temporary changes) to pay the debt only begins once the statutory demand is served on the debtor company. Pursuant to section 109X of the Corporations Act, a creditor may serve the statutory demand on the debtor by delivering it or posting it to the debtor company’s registered office. It may also be served by delivering a copy personally to the director of the debtor company.

It is crucial that you conduct an ASIC search to determine the company’s registered office and ensure it corresponds to the address stated on the statutory demand and registered post envelope. If you fail to properly serve the statutory demand on the debtor company, the statutory demand may be deemed defective pursuant to section 459J(1)(a) of the Corporations Act.

If a company owes you money, issuing a statutory demand can help you recover the debt. The requirements for making a valid statutory demand can be difficult to navigate. If you have any questions regarding this matter, feel free to contact us for a free consultation on (02) 9262 5495 or (03) 8899 7870; visit our Website; Like our Facebook Page.

This article is written by Belinda Kotvas and settled by Damin Murdock. This article is not legal advice and should not be relied upon as legal advice. All articles found on this website are intended to provide informative information, nevertheless, in many instances legislation and case law has been simplified and/or paraphrased. If you would like personal legal advice based on your current circumstances, you should contact MurdockCheng Legal Practice for a free consultation.