A statutory demand is a formal written demand for payment issued to a company (not an individual) under section 459E of the Corporations Act 2001 (Cth). It is a specific legal step that a creditor must take before they can apply to a court to wind up the company on the grounds of insolvency.
Key features of a statutory demand:
- It must be for a debt of at least $4,000 (the current threshold under the Corporations Act).
- It must be served on the company in a prescribed manner.
- The company has 21 days from the date of service to pay the debt in full, reach an agreement with the creditor, or apply to a court to have the demand set aside.
What happens if the company does not respond: If the debt is not paid and no court application is made within 21 days, the company is presumed under the law to be insolvent. The creditor can then apply to the court for an order winding up the company — a serious consequence that can result in the company's assets being realised and distributed to creditors under a liquidator's control.
If your company has received a statutory demand, seek urgent legal advice. The 21-day deadline runs from service, and missing it can have severe consequences. A statutory demand can sometimes be set aside if there is a genuine dispute about the debt.
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