Written by: Eloise Turnbull
How to recover debt from a company
A statutory demand is a powerful debt recovery tool used to recover undisputed debts owed by a company over $4,000.
A statutory demand is a formal written legal notice and demand for the payment of debts from a creditor, owed by a company debtor under the Corporations Act 2001 (Cth) (the “Act”).
The demand is a debt recovery tool that requires the debtor to:
- Pay the debt,
- Put in place a secured and suitable arrangement,
- Apply to set the statutory demand aside.
The debtor company has strictly 21 days to comply with the above requirements.
Failure to do one of these things raises the legal presumption and forces the company into insolvency. The creditor can apply to the Federal Court or the Supreme Court for an order that the company be wound up insolvent.
Eligibility requirements:
Requirements to send a statutory demand in Queensland:
- The debtor must be a company;
- The debt(s) must be $4,000.00 or more;
- The debts must be due and payable; and
- There is no genuine dispute at the time.
If these conditions are met, then you are entitled to serve the debtor company with a demand.
Effective Service
A statutory demand must be correctly served to the debtor company’s registered address in accordance with section 109X of the Act. This can be done by mailing the demand letter through the post, or by leaving it at the company’s registered office or personally delivering a copy to the director of the company.
Invalidity Risks
If the statutory demand is not correctly completed and/or served, it can be considered invalid.
There is a risk the debtor company will apply to set aside the statutory demand. The application can be brought if:
- There is a genuine arguable dispute about the debt; and/or
- When the statutory demand contains a defect that has caused substantial damage to the company.
The application must be made within 21 days of service of the statutory demand. If it is successful, it may seek to recover payment of the legal costs suffered in bringing that application.
The Australian Small Business and Family Enterprise Ombudsman released more information on how to handle outstanding debts if you are a small business. Read the PDF here.
It is important to seek legal advice prior to issuing a statutory demand. Our experienced Litigation Team is readily available to provide you with the necessary guidance and support. Contact us today to find out more!
Disclaimer:
The information contained in this article is for general informational purposes only and is not intended to provide legal advice or substitute for the advice of a professional. This information does not consider your personal circumstances and may not reflect the most current legal developments. Should you need advice, please contact our firm for targeted information relating to personal your situation.
Greenhalgh Pickard’s Litigation Team
