Statutory DemandS

A statutory demand is a legal demand made by a creditor to a company under Section 459E of the Corporations Act 2001. The demand requires the debtor company to pay a debt within 21 days from its receipt of the demand. Failure to pay will give the creditor the legal right to seek a court order to wind up the debtor company.

6 things to remember before issuing a Statutory Demand:

The debt must be due and payable.
The debtor must not have disputed the amount. You cannot issue a statutory demand if the debtor disputes the debt.
The amount of the debt must be more than $4,000.
The statutory demand must be in the proper form.
Service of the demand must be done by post to the registered office address of the company/ debtor.
The statutory demand states that the debtor company makes payment within the 21-day timeframe. Failure of the debtor to pay by the indicated date will give the creditor the cause of action to seek a court order to wind up their company.

When creating a statutory demand, section 459E subsection (3) requires that an affidavit be included unless the debt is a judgment debt. The affidavit must confirm that the company owes the debt or debts and comply with the rules. It is important that the affidavit is drafted accurately and follows the regulations. If not, the demand may be invalidated.

If the statutory demand has formal defects in its form, it can be invalidated by a court order. The Corporations Act 2001 (Cth) outlines in section 459J(1)(a) that a demand can be set aside if there is a defect in the demand that will cause substantial injustice if not addressed. This issue of substantial injustice is the threshold for determining whether or not the demand should be set aside.

According to Section 459H(1)(a) of the Corporations Act 2001 (Cth), it is possible to set aside a statutory demand without a judgment if there is a genuine dispute about the existence or amount of a debt. However, you must provide affidavit evidence to support your claim that there is indeed a dispute about the debt's existence or amount. Once the affidavit is filed, you must follow the rules for setting aside the demand.

In accordance with Section 459H(1)(b) of the Corporations Act 2001 (Cth), a statutory demand can be put on hold if there is an offsetting claim. An offsetting claim is a legitimate counterclaim, set-off or cross-demand that the company has against the person or company issuing the demand, even if it is not related to the same transaction or circumstances as the debt in question. If the offsetting claim reduces the total amount of the demand to below the statutory minimum, it can be used to set aside the demand.