Creditor’s Statutory Demands

What is a statutory demand?

A statutory demand is a demand in the appropriate form served by a creditor on a debtor requiring the debtor to satisfy or secure the debt within 21 days.

How do I issue a statutory demand?

A statutory demand must be made in the correct form pursuant to section 459C of the Corporations Act.

A statutory demand must:

  • Be in the prescribed form (Form 509H).
  • Be for a debt that is due and payable.
  • Be for an amount which is no less than $2,000.00 (the current statutory minimum).
  • State the debtor company name and its registered office.
  • Specify where the debt can be paid.

A statutory demand must be accompanied by an affidavit in support of the debt or a judgment of the Court.

What should I do if I am served with a statutory demand?

It is important to note that the debt is required to be paid within 21 days of being served with the statutory demand; otherwise the creditor gains the presumption that the company is insolvent and can apply for a winding up order. Accordingly, the debt should be paid immediately in accordance with the statutory demand.

There is also the option to resist the statutory demand. This involves filing an application with a supporting affidavit to the court within the 21 day period.

A statutory demand may be set aside on the basis that:

  • The amount owed is less than the statutory minimum.
  • Where there is a defect in the statutory demand that would cause substantial injustice to the debtor.
  • Some other reason which may include the debt being for an inflated or incorrect amount.

What happens if the debtor doesn’t comply with a statutory demand?

The creditor can apply to the court for a winding up order on the presumption that the company is insolvent. However, this presumption applies only where the winding up order is made within 3 months.