Statutory Demand

Statutory Demand

If you’ve exhausted all other options to collect on an outstanding debt, a Statutory Demand can help ensure the debt is recovered.

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Statutory Demand

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What is a Statutory Demand?

A Statutory Demand is a document issued by a creditor which requires a debtor company to pay an outstanding debt.

Typically, a Statutory Demand orders the debt to be paid within 21 days. However, this period has been temporarily extended to 6 months due to the Coronavirus Economic Response Package. This extension is currently in effect until 25 September, 2020. 

If the debtor company fails to pay the debt, or come to a suitable arrangement with the creditor, or make an application to set it aside within that time period, then the company is presumed to be insolvent. 

Once there is a presumption of insolvency, then it is open to the creditor to commence proceedings to wind up the debtor company.

When should I use a Statutory Demand?

The Statutory Demand should be used if you need to issue a formal request for payment of an outstanding debt. 

This Demand is typically deployed after the creditor has already made attempts to recover the debt, and is ready and willing to take legal action to recover the debt. They are often used when a debtor refuses to make payment, or is being hostile and unwilling to negotiate and come to a compromise.

A creditor may serve a statutory demand on a debtor company for debt or debts that total at least $2,000. However, this threshold has been temporarily increased to $20,000 due to the Coronavirus Economic Response Package. This measure is also currently in effect until 25 September, 2020.

A Statutory Demand is only appropriate in circumstances where there is no genuine dispute about the debt and there is no offsetting claim in respect of the amount owed. Therefore, Statutory Demands cannot be substituted for commencing substantive proceedings to recover a debt. The Court may order costs in favour of the company applying for the order to set aside the demand, if the company is successful in its application.

What topics does a Statutory Demand cover?

  • Creditor details
  • Debtor details (ACN, Name, Place of Business)
  • Details of debt
  • Place of Payment of Debt(s) 
  • Signing of Statutory Demand
  • Address for service of creditor
  • Choice of Governing Law
  • Affidavit to accompany the statutory demand
  • Details of the person signing the affidavit
  • Contents of the affidavit
  • Details of the witness to the affidavit
  • Fees and charges
  • Governing law and jurisdiction
  • Notices and Service of notices
  • Relationship of parties

What are the main decisions I need to make in creating a Statutory Demand?

  • Is the debtor an Australian registered company? The debtor company must be registered in Australia for the Statutory demand to be enforceable.
  • What type of debt am I trying to recover? You must be able to describe the details of the debt and you will need to determine if you would like to seek a court order to recover the debt as it will impact the required material needed to complete this document.
  • Is the statutory demand for a non-judgement debt? If so, you can choose to let the system guide you through completing the required affidavit.
  • Will the debt be paid to the address of the creditor or the lawyer? The document must specify a place within Australia where the debt can be paid
  • Who do you want to be the deponent of the affidavit? You can specify the person who will be making the affidavit, but it is important to note that the person making the affidavit must state how they came to be aware of the facts that are relied upon in the affidavit and in making the statutory demand.

What other names does a Statutory Demand go by?

A Statutory Demand is also known as: 

  • Statutory Demand with Supporting Affidavit

Frequently Asked Questions

Up to five creditors and one debtor company.

A debtor is entitled to know what is owed to whom and how the debt may be discharged.

You should therefore ensure that the debt(s) covered by the statutory demand are due and payable to all of the creditors together. 

If separate debt(s) are due and payable to separate creditors respectively, the debts cannot be joined together in a single statutory demand.

The debtor company must be an Australian registered company.

You must state the exact name and registered address of the debtor company.

A failure to correctly identify the debtor company can result in the statutory demand being set aside.

A creditor is not entitled to serve a demand at the same time as proceeding against the Debtor company’s directors in relation to the same alleged debt.  

That is an abuse of process and a reason for setting aside a demand under section 459J(1)(b) of the Corporations Act 2001 (Cth).

Yes. It enables you to make use of a statutory tool that is provided for in the Corporations Act.

A statutory demand can only be issued when a debt is over $2,000 (temporarily increased to $20,000 for the Coronavirus Economic Response Package until 25 September, 2020) and is due and payable. 

That is, you can’t issue a statutory demand if the debt is prospective, contingent, or unliquidated.

The debtor company must be able to put a dollar value on what is being demanded from them. 

If a debtor company has more than one debt, you are not required to issue multiple statutory demands. You can issue one demand that specifies the total debt owed to you and how the debts have arisen.

Yes. A Statutory Demand must specify a place in Australia where the debt can be paid and include a specific address.

This address can be the creditors address, or their lawyers or another designated address.

Additionally, item 6 of the statutory demand requires that:

  • you stipulate the address of the creditor for service of copies of any application and affidavit;
  • that address must be in the State or Territory in which the demand is served on the debtor company; and
  • if lawyers are acting for the creditor, that address will be the address of the lawyers.
  • Creditor details
  • Debtor details (ACN, Name, Place of Business)
  • Details of debt
  • Place of Payment of Debt(s) 
  • Signing of Statutory Demand
  • Address for service of creditor
  • Choice of Governing Law
  • Affidavit to accompany the statutory demand
  • Details of the person signing the affidavit
  • Contents of the affidavit
  • Details of the witness to the affidavit
  • Fees and charges

Only if the debt is a non-judgement debt. A non-judgement debt means that the creditor doesn’t have a court order to enforce the payment owed.

If you need help preparing this affidavit, please contact us for legal advice.

A debtor company may file an application to set aside a statutory demand you have served on them. If it is successful, then they may be entitled to recover the legal costs of the application. You should be aware that the potential costs orders are not insignificant.

The court can set aside a statutory demand for a number of reasons:

  • the debtor company has an offsetting claim against the creditor, which would reduce the debt below the statutory minimum;
  • there is a defect in the demand that would cause substantial injustice; 
  • there is some other reason why it should be set aside based on discretion of Court; or
  • there is a genuine dispute about either the amount of the debt or the debt itself.

 If you have concerns regarding a company’s ability to pay, you should make preliminary inquiries about the assets it owns.

If you have not obtained a judgment against a debtor company, then it is easier for a debtor to set aside a demand on the basis there is some ‘genuine dispute’. When a Court is considering this, the merits of the dispute are not required. There just needs to be a ‘serious question to be tried’. What this means is that the bar to jump over is not as high as it would ordinarily be.

A debtor company can still oppose a wind-up application, generally on the basis that the company is solvent. If a creditor utilises a statutory demand, then the only enforcement option is winding up proceedings.

The presumption of insolvency lasts for three months after the demand is served. During this period, if a debtor company has not responded to your statutory demand, you may issue winding up proceedings. 

However, a debtor company may wish to make an application to set aside your statutory demand. It needs to do this within 21 days of service of the demand and attach a supporting affidavit to the application. The Corporations Act provides a number of reasons to set aside a statutory demand:

  • the amount owed is less than $2,000, which is the statutory minimum;
  • there is a defect in the statutory demand that would cause substantial injustice if it was not set aside; or
  • there is ‘some other reason’ why the demand should not be set aside.

If the debtor’s application to set aside the Statutory Demand is not successful, they will have 7 days from the date the application is determined to pay the debt, unless the Court allows otherwise. 

Again, the legal consequence of not paying will be the presumption of insolvency.

There are several signing options available. How you sign largely depends on where the parties are located and if they will attend signing together. You can print on paper and sign, or use electronic signature tools such as Docusign or Hellosign.

If you need any assistance please contact us directly, we would be happy to assist.

If you have any questions or are uncertain about any aspect of the document please do not sign it or use it, please contact us directly and we would be happy to assist.

Absolutely! Get in touch with us and we can provide a fixed-fee price to review it.

Statutory Demand
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Not quite right? Looking for something else?

What other documents might I need?

If you’re interested in a Statutory Demand you might also need to think about:

  • Deed of Guarantee
    This document sets out the details and obligations that may apply to a guarantor if guarantees were included in the debt that is included in the Statutory Demand.
  • Loan or Loan Facility Agreement
    This document will outline the terms and conditions and obligations on the lender and borrower. This document might be relevant for the details of the debt when preparing the Statutory Demand.
  • General Security Deed
    This General Security Deed creates general security interests over all of the property of the grantor, much like a fixed-and-floating charge and can be relevant in preparing the affidavit  in the Statutory Demand.

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