Creditors Statutory Demands – Short Cut to Cash or Catastrophe?
Creditors Statutory Demands are a relatively cheap but powerful tool which can produce significant results quickly and efficiently, saving months on a long drawn out debt recovery process. However, with great power comes significant risk, and creditors need to understand when and how best to make use of this short cut, without getting lost in a labyrinth of litigation.
What is a Statutory Demand?
A statutory demand is a formal prescribed notice issued to a debtor company by a creditor pursuant to section 459E of the Corporations Act 2001 (Cth) (“the Act”). The demand is for the debtor to pay the outstanding debts within the statutory period of 21 days, or be presumed to be insolvent and face the risk of a winding up application being filed against the debtor company. Issuing a statutory demand however is subject to certain criteria stipulated in the Act. Section 459E states that a statutory demand can be issued to a person in respect of one or more debts, totalling the statutory minimum of $2,000 and must: [...]