Statutory Demands

A Powerful Option for Recovering Undisputed Company Debts

If an Australian company owes you money and has failed to pay, a statutory demand may provide a powerful mechanism for requiring payment.

O’Haire Legal assists creditors with preparing and serving statutory demands under the Corporations Act 2001 (Cth) and advising on the next steps if the debtor company fails to comply.

Speak to a Debt Recovery Lawyer →

What Is a Statutory Demand?

A statutory demand is a formal demand made against a company requiring it to pay a debt.

It is not simply another letter of demand. A statutory demand engages the insolvency provisions of the Corporations Act 2001 and can have serious consequences for the debtor company.

Once a statutory demand has been properly served, the debtor generally has 21 days to:

  • pay the debt;

  • secure or compound the debt to the creditor's reasonable satisfaction; or

  • apply to the Court for an order setting aside the demand.

If the company fails to take appropriate action within the 21-day period, it may be presumed to be insolvent.

When Can a Statutory Demand Be Issued?

A statutory demand may be available where:

  • the debtor is a company;

  • the company owes you a presently due and payable debt;

  • the debt, or aggregate of debts, satisfies the applicable statutory minimum;

  • there is no genuine dispute about the existence or amount of the debt; and

  • there is no genuine offsetting claim that would reduce the qualifying amount below the statutory minimum.

The statutory minimum is prescribed by legislation and should be checked at the time a demand is proposed.

Not sure whether your debt qualifies? We can assess it before a demand is issued.

When Should You NOT Issue a Statutory Demand?

Statutory demands should be used carefully.

A statutory demand should not be used merely to pressure a company into paying a genuinely disputed debt.

A debtor company can apply to the Court to have a statutory demand set aside on grounds including:

  • a genuine dispute about the existence or amount of the debt;

  • a genuine offsetting claim;

  • a defect in the demand that causes substantial injustice; or

  • some other reason justifying the demand being set aside.

An unsuccessful statutory demand can expose the creditor to significant legal costs.

For that reason, we recommend assessing the underlying debt and available evidence before the demand is issued.

Our Statutory Demand Process

Step 1 — Review the Debt

We review the relevant documents and determine whether a statutory demand is an appropriate recovery option.

This may include reviewing:

  • contracts and terms of trade;

  • invoices;

  • statements of account;

  • purchase orders;

  • correspondence with the debtor;

  • acknowledgements of the debt;

  • previous demands for payment; and

  • any dispute or counterclaim raised by the debtor.

Step 2 — Prepare the Statutory Demand

If appropriate, we prepare the statutory demand in the prescribed form.

Where the debt is not a judgment debt, the statutory demand must generally be accompanied by an affidavit verifying that the debt is due and payable and that there is no genuine dispute about its existence or amount.

Step 3 — Serve the Company

Proper service is critical.

We arrange for the statutory demand to be served on the debtor company and retain evidence of service.

Step 4 — Monitor the 21-Day Period

The debtor company then has the statutory period to respond.

The company may pay, negotiate payment, seek to secure or compound the debt, or commence proceedings seeking to have the demand set aside.

Step 5 — Consider the Next Step

If the company does not comply with the demand within the required period, a statutory presumption of insolvency may arise.

We can then advise whether it is commercially appropriate to consider an application to wind up the company.

Speak to a Debt Recovery Lawyer →