Statutory Demand Notice
If your business is struggling with insolvency, it’s possible that you’ll receive a Statutory Demand Notice from a creditor. Statutory Demand Notices are a formal attempt by the creditor to recover a debt they’re owed. Receiving a Statutory Demand is a serious matter that can’t be ignored. If you don’t respond to a Statutory Demand, your business is at real risk of being declared insolvent. In this article, we’ll explore Statutory Demands in more detail and discuss what you need to do if a creditor serves you with a formal Demand.
What Is a Statutory Demand Notice?
Financial stress can be incredibly difficult to set aside. It often results in a loss of sleep, a breakdown in your relationships and other negative effects like mood swings. Not only are these things bad for your health, but the reality is that they’re also unhelpful. Too often people find themselves stuck in place because of their stress. This creates a self-defeating cycle, and it becomes increasingly difficult to focus on actual solutions. While you can’t simply flip a switch and stop worrying, it’s important to keep an eye on your reaction to stress and ensure it’s not stopping you working on your problems.
Requirements to Make a Statutory Demand
All Statutory Demands are required to comply with regulations set out in the Corporations Act 2001. For a Statutory Demand Notice to be valid, it must:
- Relate to a debt that is due and payable
- Relate to a debt that totals $2,000 or more
- Specify the debt and the amount owed
- Be in writing in the format set out by Form 509H
- Require the debtor to comply with the demand within 21 days after the notice is served
- Be signed by the creditor (or on their behalf)
Importantly, a Statutory Demand is also required to be accompanied by an affidavit from the creditor. The creditor’s affidavit is a written statement verifying that the debt is due and payable. An affidavit isn’t required if the Demand pertains to a judgement debt – that is, a debt that the Court has judged you to owe.
What Should I Do if I Receive a Statutory Demand Notice?
A Statutory Demand Notice is a serious document that shouldn’t be ignored. If you have received a Statutory Demand Notice, you have 21 days to respond. If you don’t respond within 21 days, there will be a presumption of insolvency against your business. This means your creditor can easily apply to the court to wind up your company. The courts are strict about compliance with Statutory Demands. You’re very unlikely to receive an extension on the 21 day response period.
There are two possible responses to a Statutory Demand:
- You can pay the amount demanded (or compound for that amount), or;
- You can apply to the Supreme Court to have the Demand set aside.
In most cases, a Demand will only be set aside if the notice contains a defect that would cause a “significant injustice” to the debtor company. Alternatively, if you can show that there is a genuine dispute as to the amount of the debt, or whether it’s payable, the Court may set the Demand aside. The Court isn’t interested in the specifics of the dispute. If you can show that there is a genuine question over whether the debt exists, the Court may set the Statutory Demand Notice aside.
What Is a Presumption of Insolvency?
Insolvency occurs when a company is unable to pay its debts. Insolvent companies are often wound up in liquidation to repay creditors.
If you fail to respond to a Statutory Demand Notice within 21 days, it will be presumed that your company is insolvent. This presumption makes it easy for creditors to apply to the court to have your company wound. Under different circumstances the creditor would have the difficult task of proving that your company is insolvent. But, if you fail to respond to a Statutory Demand, they can rely on the presumption of insolvency to support their claim. The presumption of insolvency lasts for 3 months following a Statutory Demand Notice.
Have You Received A Statutory Demand Notice? Contact Business Savers Right Away
Receiving a Statutory Demand Notice is a serious matter. Demand notices aren’t used as everyday debt collection tools, and they carry serious consequences if you don’t respond within 21 days. If you’ve received a Demand, contact Business Savers immediately. There are a number of ways to deal with a Statutory Demand, but it should always be handled immediately. Our team has experience in a wide range of personal and business insolvency issues, so we can help you manage your situation and decide on the best course of action. Please don’t hesitate to contact us if you have any questions about Statutory Demands, how you should respond to a creditor’s claims or personal insolvency agreements – we’re always happy to help.