For many of us, bills and invoices are not necessarily at the top of our “to do” pile; and can easily be lost in a tower of paperwork. This will often result in a polite reminder notice being sent. No harm done, right?

Not true for companies, who are not always entitled to such an indulgence. This is particularly true if included in that pile is a Creditor’s Statutory Demand. In fact, failure to deal with a demand of this type can have very serious consequences for your company.

What is a Statutory Demand?

A Statutory Demand is essentially a formal demand for payment of a debt. More importantly, it is also the first step in the potential winding up of your business.

Once the Statutory Demand has been served, you have 21 days to respond to it. If you fail to respond within that crucial time frame, the company will be presumed insolvent. This means that your creditor can apply to the Court to have the company wound up, and you will be burdened with proving you are solvent in Court. The process of proving solvency is not always simple and can often cost tens of thousands of dollars.

What are the Consequences of a Statutory Demand?

If your company is wound up a liquidator will be appointed, and you will lose control of the company’s assets and affairs. It could also lead to public examinations and claims against any directors or associates of the company.

Addressing these issues in Court is costly, and could be avoided by responding to the Statutory Demand within that initial 21-day period. The sooner you are able to address a Statutory Demand the better, as your leverage to resolve the dispute will typically diminish the closer you get to the 21st day after service.

What should you do if you receive a Statutory Demand?

Considering the implications of not responding or not knowing how to respond to a Statutory Demand when you receive one, it is essential that you speak to your lawyer as soon as possible to ensure the issue is dealt with properly, before any lasting damage is done. You should take the service of a Creditor’s Statutory Demand very seriously.

It is also important that you take note of the day the Statutory Demand was served. This could be different to the day it was received. Any proof you can find confirming the day that it actually turned up in your mailbox could become very important. A daily ledger recording all mail you receive might assist with this.

Any agreement to resolve the debt attached to the Statutory Demand must be reached before the 21-day period expires. The only way you can extend the timeframe for compliance of a Statutory Demand is through the Courts.

Praxis Lawyers have experience in not only issuing Statutory Demands, but also in acting for companies that resist them. We can help you through the process; but please be mindful that the sooner you contact us the better.