Statutory demands
Statutory demands

Statutory demands

Like other demands, a statutory demand is sent to a debtor company (someone that owes you). While it can help to recover your money, it is not really designed to be a debt recovery tool. It can, however, become a real incentive for your debtor to pay their debts.

Learn more Get in touch

Information about statutory demands

Let’s look at some basic information about statutory demands and the benefits and risks that are associated with them.

The basics

  • A statutory demand can only be issued when a debt is over $2,000 and is due and payable.
  • The debtor company (the one owing the money), must also be able to clearly put a dollar value on what is being demanded from them.
  • If a debtor company has more than one debt with you, you are not required to issue multiple statutory demands. You can just issue one demand that clearly specifies the total debt owed to you and how the debts have arisen.
  • A statutory demand is issued by the creditor (the one that has money owed to them), and the payment term is typically 21 days. In Australia, it is served under s459E of the Corporations Act (Cth).

Benefits

The threat of insolvency if a debtor company does not comply with a statutory demand can be a great motivator to pay the bet.

This often opens communication between the parties.

As noted, despite the demand process not being designed to be a debt recovery tool, it can prove to be very effective!

A statutory demand can be a faster and far more efficient way to wind up proceedings than going to court which can become very lengthy and expensive.

Risks

The primary risk is that a debtor company can make an application to ‘set aside’ the statutory demand. If this is a possibility, the creditor is usually notified in advance and has an opportunity to withdraw the statutory demand.

If the debtor company does make an application to set aside the statutory demand and is successful, they may also entitled to recover their legal costs of the application.

As with any demand from one party to another, there are always risks and benefits to be considered. We encourage both sides to discuss options with us to ensure an outcome that is fair and equitable for all concerned.

Get in touch

Fill in the form below and one of our team will be in touch. You can also phone 1300 149 140 during standard business hours.

  • This field is for validation purposes and should be left unchanged.

Related Legal Insights

Key considerations for controlling business debtors

Managing your debtors can help your business grow While growing your business it can become easy to lose sight of effectively managing your debtors, however doing so, can help your business continue to grow successfully. The information below can help make the task of controlling business debtors much easier! As...

Read more
Setting Aside a Statutory Demand

A statutory demand can be a powerful tool for a creditor seeking to extract funds from a debt-owing company. The consequences of failing to deal with a statutory demand can be drastic for a debtor company, including being wound up and placed in liquidation. In this article we consider the...

Read more
When is a loan payable on demand?

When is a loan payable on demand? Many of us have helped a family member or friend before by providing an interest-free loan. Although the loan is not intended to be a gift, the details may not have been formalised and there may be no stipulation as to when and...

Read more
Alternatives to Bankruptcy

Alternatives to Bankruptcy You may know someone who is having difficulty managing their financial affairs and has debts and liabilities which they cannot meet. They may be considering declaring themselves bankrupt. Before they do so, consideration should be given to some alternatives which are available aside from becoming bankrupt and...

Read more
Competing creditor claims over assets of insolvent trustees

Competing creditor claims over assets of insolvent trustees The High Court of Australia has confirmed the status of priority creditors prescribed by s 433 of the Corporations Act 2001 (Cth) incidental to the winding up of a trading trust –  Carter Holt Harvey Woodproducts Australia Pty Ltd v The Commonwealth [2019]...

Read more
Applying for Substitution in Winding Up Proceedings

Applying for Substitution in Winding Up Proceedings In winding up proceedings, if the debtor company pays out the applicant’s debt, the Court has power to order the substitution of another creditor as the applicant for a winding up. The substitution process can be very cost-effective and efficient because after substitution,...

Read more
You have a judgment debt in your favour – now what?

You have a judgment debt in your favour – now what? If you have obtained a judgment from a Court or Tribunal in your favour with respect to a debt owed to you, you are known as a judgment creditor. The person or business who owes the debt is known...

Read more
Leave to proceed against a company in liquidation

Leave to proceed against a company in liquidation The insolvency of a company often leads to its liquidation whether instigated voluntarily or by court order. A liquidator is appointed to ascertain and bring in company assets (if any) and convert those assets into cash for distribution amongst the company’s creditors...

Read more
Attention to Detail – Defects in Statutory Demands

Attention to Detail – Defects in Statutory Demands A statutory demand is a useful way to exert pressure on a company to force it to pay its debts. However, a creditor using a statutory demand to quickly recover a debt can run into trouble if the legal requirements regarding the...

Read more
What are your options if your company is insolvent?

What are your options if your company is insolvent? If your company is in financial difficulty and heading towards insolvency, there are options available which allow a company to be guided through its financial distress. The best option for your company depends on the solvency of the company and the...

Read more
Serving a Statutory Demand: Guidelines for Creditors

Serving a Statutory Demand: Guidelines for Creditors A statutory demand is a useful way to pressure a company to pay its debts. However, a creditor using a statutory demand to quickly recover a debt can run into trouble if the legal requirements for service of the statutory demand are not...

Read more
The Power of a Statutory Demand

The Power of a Statutory Demand If you are in business, whether it’s in the capacity of a company director, in management or if you represent a company as its accountant, you must know of the power of a Statutory Demand.  This article sets out the huge benefits in using...

Read more