Creditor Statutory Demand
I’ve been served with a creditor statutory demand. What do I do?
Being served with a creditor statutory demand is serious and can be a stressful and complicated process. If you’re a small or start-up business, you may not have the contacts or experience to know what to do if you are served with one. Lawbase knows how difficult this process can be to navigate, so we’ve outlined what you need to do if your business is served with a creditor statutory demand.
A creditor statutory demand is a formal demand to collect a debt which is not in dispute and is used to assess whether a business is able to pay the debt. Once you have received a creditor statutory demand, you have 21 days to pay the debt, plus interest and the legal costs involved in issuing the demand, or your business will be deemed insolvent and may be placed in liquidation. This means you will lose all control over your business so it is vital you take a creditor statutory demand seriously and follow the correct procedures.
What should a creditor statutory demand contain?
To be valid, they must be in writing, follow the prescribed form, and outline the following information:
- The amount of the debt
- The timing of the payment
- Information on what the creditor will do if you don’t pay
- Contact details of the creditor
- Inform you of your right to dispute the debt.
You have two options once you’ve been served with a statutory demand – either pay the debt, or file for an application to have the demand set aside.
What happens if I can’t pay the debt?
If you can’t pay the debt within 21 days, the creditor may apply to the court to have your business placed in liquidation, resulting in you losing control over your business. This is a lengthy and complicated process for both the creditor and the debtor.
If possible, we recommend that you negotiate with the creditor to pay the debt off in instalments. In many cases, a creditor would prefer this option over the more involved process of putting your business in liquidation.
What are the reasons to have a creditor statutory demand set aside?
You can file an application with the court to have the demand set aside for the following reasons:
- If you dispute the debt, or the amount of the debt
- The demand may contain incorrect information or is not in the prescribed form
- The creditor in question may owe your business money, which can offset some or all of the amount you owe.
Important note: Your application must contain an affidavit containing supporting evidence for any of the above reasons.
Lawbase highly recommends that you get sound legal advice when dealing with a creditor statutory demand. We provide easy to understand legal advice to small and start-up businesses in a professional and friendly manner. If you’ve been served with a creditor statutory demand and need advice, contact the team at Lawbase today.