Blog

In Australia, statutory demands are a powerful tool for creditors looking to recover outstanding debts from companies. In this legal process we would serve as a formal notice to a debtor company, demanding payment of an undisputed debt. If the company doesn’t comply, it could face significant consequences, including liquidation. Let’s break down what statutory demands are, how they work, and how you can use them effectively to get your money back. 

What are Statutory Demands? 

A statutory demand is a formal request you can make to a company that owes you money. Under the Corporations Act 2001 (Cth), it’s used when the debt is undisputed and is more than $4,000. 

Key Features of a Statutory Demand 

Formal Requirements

The demand needs to be in writing, using a specific form. It should include details like your information, the debtor’s information, the amount owed, and supporting evidence such as an affidavit confirming the debt. 

21-Day Compliance Period

Once served, the debtor company has 21 days to pay up, settle, or apply to the court to have the demand set aside. 

Consequences of Non-compliance

If the company doesn’t respond within those 21 days, it’s presumed insolvent. This gives you the right to instruct your lawyer to ask the court to wind up the company. 

Undisputed Debt

The debt must not be under genuine dispute. If there’s a dispute, the debtor can try to have the statutory demand set aside.  This is a key aspect of making sure that its issued properly. 

The Purpose of Statutory Demands 

For creditors, a statutory demand is a straightforward, cost-effective way to recover debts without jumping straight into court proceedings. It acts as a serious wake-up call to debtor companies, often prompting them to settle the debt quickly to avoid liquidation risks and especially to avoid their company being liquidated. 

Strategic Use by Creditors 

Knowing how to use statutory demands strategically can boost your debt recovery efforts. Here’s what you should consider: 

• Verification of Debt: Make sure the debt is clearly documented and undisputed before issuing a statutory demand. 

• Timely Issuance: Issue the demand promptly once it’s clear the debt is overdue and unlikely to be paid without intervention. 

• Professional Guidance: Get legal advice to ensure the statutory demand is properly drafted and served, minimizing the risk of it being set aside for technical reasons. 

Conclusion 

Statutory demands are a practical way for creditors in Australia to recover debts from companies. By understanding how they work and how to use them strategically, you can effectively secure outstanding payments.  

For businesses looking to improve their debt recovery process, statutory demands offer a clear path to enforce financial obligations and maintain financial health. 

Key Takeaways

• As a creditor, statutory demands can make a big difference in recovering debts, helping keep your business financially strong.
• Getting professional legal advice can enhance the use of statutory demands, ensuring compliance with Australian law and maximizing your recovery efforts. 
• We offer no win no fee debt recovery for corporations who are owed $4,000 or more.