Statutory Demands – a powerful weapon for debt recovery if wielded correctly

Every business will encounter customers who do not pay for work you have completed for them. If you are dealing with a debtor company who won’t pay, a Statutory Demand may be a good way of recovering the unpaid money.

A Statutory Demand under Part 5.4 of the Corporations Act 2001 (Cth) can be brought by a creditor against a company that owes them money. It is heard by the NSW Civil and Administrative Tribunal (NCAT), an arena that provides a faster and less expensive means of resolving disputes compared to a standard debt recovery procedure in Court.

All Statutory Demands will need to strictly comply with the following requirements (otherwise, the company owing the debt could apply to set aside the Statutory Demand). The Statutory Demand must:

• Be in a prescribed form (usually Form 509H),
• Clearly state a single sum of money to be recovered (the total debt owed must be $2,000 or more),
• Specify the source or sources of the debt,
• State that the company debtor must pay the amount of the debt or make satisfactory arrangements to secure payment within 21 days after the Statutory Demand is served on the company, and
• Be signed by or on behalf of the creditor,
• Be accompanied by an Affidavit of the creditor that confirms that there is debt to be recovered,
• Be no genuine dispute about the debt owed.

Once issued with a Statutory Demand, the debtor company will usually pay the debt owed, or at least be spurred to action and attempt to negotiate. However, in the situation that the company does not satisfactorily respond to the Statutory Demand, the company creditor can apply to the Court to have the company debtor wound up in insolvency under section 459C(2)(a) of the Corporations Act 2001 (Cth).

Frank Law can assist you with the issuing of a Statutory Demand, so that your debts are paid promptly and cost effectively.

If you have further questions, please contact us at frank@franklaw.com.au.

This is not legal advice.