Statutory Demands:

A statutory demand is a document under the s459 of Corporations Act prepared to demand a debt which is owed by a company. A person may serve on a company a demand relating to a single debt that the company owes to the person, that is due and payable and whose amount is at least the statutory minimum; or 2 or more debts that the company owes to the person, that are due and payable and whose amounts total at least the statutory minimum. Unless the debt, or each of the debts, is a judgment debt, the demand must be accompanied by an affidavit that verifies that the debt, or the total of the amounts of the debts, is due and payable by the company; and complies with the rules. A statutory demand needs to be responded to within a prescribed timeframe either by making a cross claim or an application to set aside the statutory demand because the debt is disputed. Obtaining professional legal advice from a Debt Recovery and Insurance Lawyer may be greatly beneficial if you are in the process of making a Statutory Demand.

The period for compliance with a statutory demand is if the company applies in accordance with section 459G for an order setting aside the demand if, on hearing the application under section 459G, or on an application by the company under this paragraph, the Court makes an order that extends the period for compliance with the demand—the period specified in the order, or in the last such order, as the case requires, as the period for such compliance; or otherwise—the period beginning on the day when the demand is served and ending 7 days after the application under section 459G is finally determined or otherwise disposed of; or otherwise—21 days after the demand is served.

An application to wind up the company can then be made if the statutory demand is not complied with. This must be by originating process under the Corporations Rules 2000 in the prescribed form.   The application should not contain matters of evidence, which will be contained in the accompanying affidavit and in the case of a creditor's application the affidavit should state that the applicant is a creditor of the company  and give particulars of the debt, including the nature and amount, and verify particulars of service and non-compliance with a statutory demand if that is the ground relied on. Unlike the position in bankruptcy a secured creditor who files an application for a winding-up order is not obliged to refer to the fact that security is held, nor to undertake to give it up in the event of an order being made. Also unlike bankruptcy, the well-established practice is that two distinct creditors with separate and discrete debts owed are not allowed to bring a joint application, on the basis that the applicant brings an application in a representative capacity and other creditors would file notices of intention to appear, and if necessary, applications to substitute under s 465B. This prevents a multiplicity of proceedings. Proper legal advice from a Debt Recovery and Insurance Lawyer may be of great assistance in this regard.

The procedure for obtaining a winding-up order is regulated by specific rules of court made in pursuance of the court's general rule-making power. The uniform Corporations Rules 2000 are now the same throughout Australia for each court having a corporations jurisdiction. Section 459T provides that a creditor may, where there are joint company debtors (two or more), in relation to the debt owed, make a single application for the winding-up in insolvency of the debtors, whether the companies are partners. The court may order one or more of the debtor companies be wound up, even if it orders that the application be dismissed in relation to another or others.

Where the creditor is, as is usually the case, relying on the non-compliance with a statutory demand, the application must include particulars of the service of the demand and the failure of the company to comply with it.  Also, the application must have a copy of the demand attached to it and, if the demand has been varied by an order pursuant to s459H, a copy of that order must be attached. Furthermore, if the debt to which the demand refers is not a judgment debt, then the application must be accompanied by an affidavit, complying with the rules of court, verifying the fact that the debt claimed is due and payable by the company. Professional legal advice from a Debt Recovery and Insurance Lawyer may be of great assistance in these procedures.

After filing, the application, whatever form it takes, and the supporting affidavit must be served within 14 days on the company at its registered office, either by leaving it there, sending it by post or delivering a copy of the document personally to a director of the company who resides in Australia. If the company has no registered office, service is effected by leaving a copy with any member, officer or servant at the principal or last known principal place of business of the company, or as the court directs. Where the company is already being wound up voluntarily or is in Pt 5.3A administration, the application must be served upon the liquidator or administrator.

If you would like further information or wish to discuss your statutory demand matter with us please do not hesitate to contact us by telephone on (02) 9233 4048 or by email to info@navado.com.au. 

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