Statutory Demands – Tempora Legal

What is a statutory demand and how to set aside a statutory demand?

If your company has received a statutory demand then it is important to act fast. We include general information about statutory demands below. If you need legal advice or representation, please send us an enquiry sooner than later.

A statutory demand is issued by a creditor of a company pursuant to s 459E of the Corporations Act 2001 (Cth). The demand must comply with a number of procedural requirements including, in some instances, to be supported by an affidavit of the creditor or their representative.
One main condition is that the amount claimed in the demand is above the statutory minimum. That amount is temporarily $25,000. However, depending on when the notice was issued (in the past and in the near future), the amount can also be $2,500. It is therefore very important to note the issue date of the statutory demand.
When a creditor serves your company with a statutory demand, you only have a short amount of time to take action to comply with the demand’s requirements. The requirements are set out in the demand itself and are discussed further below. The time for compliance is currently six months, however, depending on when the notice was issued (in the past or in the near future), the time for compliance can also be 21 days. It is therefore very important to note the issue date of the statutory demand.
Your company may comply with a statutory demand by complying with the demand (ie, paying the amount claimed or negotiating an arrangement with your creditor), or by applying to the Federal Court or Supreme Court of Western Australia to set aside the statutory demand pursuant to s 459G of the Corporations Act 2001 (Cth). Pursuant to that section, your company may be able to apply to the Court to set aside the statutory demand on the following grounds:

a. there is a geniune dispute as to the debt (s 459H(1)(a));

b. your company has an offsetting claim (s 459H(1)(b));

c. there is a substantial defect in the demand (s 459J(1)(a)); and/or

d. for some other reason (s 459J(1)(b)).
If a company applies to set aside the statutory demand, the time for compliance with the statutory demand will automatically be extended pending determination of your company’s application (s 459F(2)). If your company is successful in setting aside the statutory demand, then the demand will be of no force or effect and no presumption of insolvency can occur under the demand.
If you do not take action to set aside the statutory demand within the time specified in the demand, your company may be presumed insolvent and may entitle the creditor to commence winding up proceedings against your company. Your company may be unable to oppose future winding up proceedings against the company on the grounds which your company may otherwise have challenged the statutory demand on.
We are able to assist your company in attempting to negotiate an arrangement with your creditors and advise and represent you and your company on your prospects in setting aside the statutory demand. Send us an enquiry to find out more or continue to research on our website. We discuss winding up proceedings next.

+61 (0)4 9216 1121

PO BOX 26, Beechboro, Perth, Western Australia 6063