Part 2: The life cycle and purpose of a Statutory Demand

In this second instalment of our six-part Statutory Demands series, we delve into the rationale behind a creditor’s decision to issue a Statutory Demand. Additionally, we examine the critical criteria that must be satisfied to ensure a Statutory Demand is properly served, along with the pertinent timeframes.

Part 2: The life cycle and purpose of a Statutory Demand

Why does a creditor issue a Statutory Demand?

The reason a creditor issues a Statutory Demand is to either get paid the amount they are owed or to use the non-payment as evidence that the company is insolvent. This proof can then be used in proceedings for a Liquidation Order. Note that while a demand can be made upon an individual, this series focuses on actions against a company.

The creditor that issues the Demand must comply with the law for it to be effective.

• The claim must be for an amount greater than $1,000.00
• The debt must be due
• The claim must be in writing (the typical form was illustrated in article 1 of this series)
• The document must require the debt to be paid, or other arrangements to be made that are agreeable to the creditor, within 15 working days of it being served

Delivering a Statutory Demand

A very important aspect is that the Demand is properly served. The document is considered a legal document, so it must follow specific rules for how it is delivered. Because time is a relevant feature of the Demand, the time that it was served is important.

The address for service is the registered office of the Company. That information can be found by searching the Companies Office website and using your company name as the search criteria. It may be necessary to refresh your registered office details to ensure you receive any notices intended for the company. Note that the effective date of a change of address for a registered office is five working days after notice has been provided to the Registrar (using the resources found on the website).

A Statutory Demand can be served by leaving it at the registered office address or giving it to an employee of the company at the company’s head office or principal place of business. There is a risk that the company has been properly served but you are not aware of the fact because the service has not been brought to your attention. The timing clock starts the moment the company has been adequately served, even if you aren’t aware of it.

Understanding why a Statutory Demand is served

The motivation for a creditor to issue a demand is to get paid. If that doesn’t happen, then the secondary purpose is initiated – using non-payment as evidence that the company is insolvent. As shown in the diagram below, there are strict time limits for how this secondary purpose may be carried out.

Often, housekeeping tasks like maintaining appropriate addresses at the Companies Office become submerged under the daily toil of operations. Investigation on that front can be attended to whenever a short interlude appears in your day.

The bigger questions to ask, though, are why the creditor is pursuing the company in this manner and what options are available to minimise the threat that the Demand carries. These are vital questions to resolve, and here at BWA, we can explain the available options in relation to your circumstances.

Read Part 1: The arrival of a Statutory Demand