A Statutory Demand is one of the most effective and efficient ways to recover a bad debt; however, not many utilize it or understand how and when to use it. At Slater Byrne Recoveries, we try to make the Statutory Demand process simple for our clients, so they can understand how it works and realise how effective it can be to assist with collecting an overdue debt.
What is a Statutory Demand?
A Statutory Demand in Australia is a legal demand made by a creditor to a company under Section 459E of the Corporations Act 2001. The demand requires the debtor company to pay a debt within 21 days from its receipt of the demand. Failure to pay will give the creditor the legal right to seek a court order to wind up the debtor company.
6 things to remember before issuing a Statutory Demand in Australia
- The debt must be due and payable. If you have 30-day payment terms, that 30-day term must have expired before a Stat Demand can be issued.
- The debtor must not have disputed the amount. You cannot issue a Stat Demand if the debtor disputes the debt. We must be informed if any dispute has ever been raised.
- The amount of the debt must be more than $2,000 ($4,000 starting 1 July). If the amount is less than the statutory minimum, you cannot issue a Stat Demand.
- The Stat Demand must be in writing and drafted and served by a solicitor. Because the Stat Demand is a legal document, it must be in the proper form. A solicitor must also verify the information contained in the Stat Demand.
- Service of the Demand must be done by post to the registered office address of the company. The Stat Demand does not need to be served in person. In conjunction with service by post to the registered address, Slater Byrne continues to contact the debtor over the 21-day period and will email them a copy of the Stat Demand to ensure they have received it.
- The Stat Demand always demands the debtor company pay within the 21-day timeframe. The Stat Demand must specify the date within which the debtor must pay. The date is also important because, failure of the debtor to pay by the indicated date will give the creditor the cause of action to seek a court order to wind up their company.
Why Issue a Stat Demand?
A Stat Demand is often used as a “test” to determine the solvency or insolvency of a company. When used correctly, it can ensure a quick response and payment from your debtor who has otherwise been avoiding contact, and or making repeated broken promises for payment.
Read our case studies on how we used the Stat Demand for our Clients:
- Slater Byrne recoups 100% of debt for a U.S.-based Client by way of a Stat Demand.
- Successful debt collection for Shore Hire using Stat Demand.
- Full amount collected for a New Zealand Client during the pandemic via a Stat Demand.
- Slater Byrne collects full amount + costs from debtor in wind-up proceeding using Stat Demand.
How Does the Statutory Demand Work in Debt Collection?
As part of the debt collection process, the Stat Demand works in the following manner:
- Creditor issues a Statutory Demand.
- The debtor will pay the outstanding amount on or before the 21 days indicated in the Stat Demand. Or, the debtor disputes the amount within 21 days of their receipt of the Stat Demand. The Debtor may also apply to set aside the Stat Demand. To do so they must have a genuine dispute.
- If the debtor applies to set aside a Statutory Demand, Slater Byrne asks our solicitors to look at the merits of their dispute. If there is a genuine dispute that must be worked through, we will consent to the Stat Demand being set aside while we work through the issues raised.
- Should the debtor not pay within the required time frame, the creditor may apply to put the debtor company into liquidation.
As part of Slater Byrne’s debt collection process, we’ve used the Statutory Demand – for both domestic and overseas Clients – especially in instances where the debtor has made numerous promises to pay or has stopped communicating but is continuing to trade.
Please contact us at any time should you wish to discuss the Stat Demand process in further detail or to discuss your specific case and a possible solution to your matter.
- Statutory Demands in Australia – When and How to Issue
- Commercial Credit Defaults: How do they affect your business?
- Debt Collection for Aged Care Facility in Australia
- How to recover debts from an insolvent company?
- Debt Collection in Australia: FAQs Answered
Liam White joined the Slater Byrne Recoveries team in early 2013. He has worked across the credit & dispute resolution industry for a number of years. He is currently working in a Marketing/Head of Sales capacity at Slater Byrne Recoveries.