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Statutory DemandsBy Richard Cowen, Tucker & Cowen, Lawyers, Brisbane.

What is a statutory demand?

A statutory demand is a demand for the payment of a debt, or debts, totalling greater than $2,000.00 that is due and payable by a debtor company to a creditor. The demand must describe the debt claimed and be in the form prescribed by section 459E of the Corporations Act 2001 (Cth).

A statutory demand if ignored, can lead to the winding up of your company

Statutory demands are the first step in the process of the potential compulsory winding up of a company and are the corporate equivalent of a bankruptcy notice issued to individuals.

When is a statutory demand due?

Upon receiving a statutory demand, your company has 21 days to either pay the demand in full, or file an application seeking for it to be set aside. Broadly speaking, the 21 day time period for filing an application is unable to be extended.

Failure to comply with a statutory demand gives rise to a presumption of your company being insolvent.

If your company fails to comply with a statutory demand, it is presumed to be insolvent. Unless your company can prove its solvency, it may be wound up.

How do you receive a statutory demand?

Your company can be served with a statutory demand by:

  1. leaving the demand at or posting it to, your company’s registered office; or
  2. delivering the demand in person to a director of your company

(even if they are not recorded as a director of your company with ASIC).

You should ensure that ASIC is notified of any change to your company’s registered office.

Accordingly, if your company’s registered office is outdated (or is unaware of the importance of a statutory demand), you may not be made aware that your company has been served with a statutory demand within the 21 day compliance period.

Key takeaways

In light of the above, it is important that:

  1. you are aware of your company’s registered office as recorded by ASIC;
  2. if the registered office is an accounting or law firm, they are instructed to immediately notify you of any statutory demand;
  3. key personnel are informed of the significance of statutory demands; and
  4. your company complies with the statutory demand within the compliance period or otherwise seeks legal advice immediately.

Contact the author directly by email or by telephone.

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