Contents
Key Takeaways
- A Statutory Demand is a cost-effective debt recovery process;
- It is important to get the process right or risk losing valuable time in recovery of the debt;
- If the debtor does not comply with the Statutory Demand, the next step in the process is a compulsory winding up.
If a company owes you $4,000.00 or more, you may be able to lodge a statutory demand, pursuant to section 459E of the Corporations Act 2001 (“the Act”).
It provides businesses with a cost-effective way to recover their debt. While some debtors may not take letters of demand seriously, they will often know that statutory demands can lead to the winding up of their company. This makes statutory demands a, useful tool for businesses needing to get a response from the debtor.
6 Steps to a successful claim
There are formal requirements that must be met to issue a statutory demand as outlined in section 459E of the Act. The demand must:
- relate to a debt or debts that are due and payable and at a total of at least $4,000.00;
- specify the debt and its amount;
- require the company to pay the debt within the statutory period of 21 days after it is served;
- be in writing and in the prescribed Form 509H;
- be signed by or on behalf of the creditor; and
- unless one of the debts is a judgment debt, be accompanied by an affidavit sworn by an authorised person which verifies the debt is due and payable by the company and complies with the rules.
It is important that the requirements listed above are carefully completed to not cause any dispute to be raised as to the debt.
Importance of serving the debt
The demand must be validly served on the debtor.
The Act provides that a demand can be properly served by:
- Leaving it at, or posting it to the company’s registered office; or
- Delivering it personally to a director who resides in Australia.
Once the demand has been validly served, the debtor has 21 days to respond and pay the debt or apply to have it set aside. If the debt is not paid, the creditor’s next step is to apply to have the company wound up.
Key issues to consider
Statutory demands are an excellent tool for businesses to recover their debts. They are best used when the debt is indisputable. However, there is always a risk that, the debtor fails to pay and winding up proceedings will need to.be commenced.
Next steps
Bad debts can be devastating to your business. That is why choosing the right debt recovery mode is important.
Speak to one of our debt recovery experts who can recommend a tailored approach to recovering your debt.
Contact: Lorri Field
For more information, contact us at pdclaw.au or visit the Corporations Act 2001 (NSW).
Madyson is a Lawyer who worked for PDC Law until 2025 in various areas such as private lending, strata, disputes and leasing.
