Creditors are increasingly issuing statutory demands against
a debtor company as a means of obtaining payment of outstanding
debts of more than $2,000.
A statutory demand is an effective tool in the armoury of a
creditor seeking payment from a company.
There are serious legal consequences for the debtor company
if the statutory demand is inadvertently overlooked or
When a statutory demand is served, the debtor company has 21
pay the amount claimed;
secure payment of the debt to the creditor's
reasonable satisfaction; or "
file and serve an application to set aside the statutory
The 21-day period cannot be extended by the court.
A debtor company can seek to set aside a statutory demand
where there is a genuine dispute as to the existence or the
amount of the alleged debt or if the debtor company has an
The debtor company will be deemed to be insolvent if it
fails to do one of the three specified things within the 21-day
Where the debtor company fails to comply, the creditor can
apply to wind up the debtor company. Other creditors can also
join in the winding up application.
If you are served with a statutory demand it is imperative
that you do not delay in obtaining legal advice. There may be
options available to avoid a winding up application.
If a professional adviser whose business address is the
registered office of a client receives a demand notice issued
to the client, they must immediately bring it to the
Delay or failure to inform the client can have dire
consequences as the 21-day time period commences the moment the
statutory demand is served at the registered office
irrespective of when the client is actually informed of it
All companies should check to ensure the registered office
details for the company are current and appropriate.
The content of this article is intended to provide a
general guide to the subject matter. Specialist advice should
be sought about your specific circumstances.
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