Knowledge

In our previous article, “What is a Statutory Demand?” we outlined what a statutory demand is and the high-level impact of not complying with it according to the Corporations Act 2001 (Cth). In this article we will explore the impact of a statutory demand from a creditor’s perspective and a debtor’s perspective.

Section 95A(1) of the Corporations Act 2001 (Cth) defines a ‘person’ (which includes a company) as being “solvent if and only if, the person is able to pay all the person's debts, as and when they may become due and payable.” Insolvent is defined in s95A(2) as being unable to pay all of its debts as and when they become payable. This definition clearly places the test on a cash flow test rather than a balance sheet test.