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