Part 4: When a Statutory Demand matures

So far in this series, we have covered what a Statutory Demand is, critical time deadlines for the proper functioning of the demand process, and the essential features of the demand. In this fourth instalment of the Statutory Demands series, we examine what happens when the demand matures. Critical to this stage is an understanding of the timing, as this knowledge will give you the ability to work with an Administrator or Liquidator of your choosing, rather than having one imposed on you.

Read Part III: The creditor and the Statutory Demand

Part 4: When a Statutory Demand matures

What happens when a Statutory Demand matures and what are your options?

A Statutory Demand will mature if it lies unanswered by the debtor company for 15 working days after the date that it was served. The important factor here is the Creditor’s motivation to serve the demand, which is to get paid for the amount, and if not paid, then proceed toward liquidation.

Liquidation is not an automatic consequence of the demand maturing. The Creditor now needs to prepare a more significant document that will be filed in the High Court that is nearest to the city of the debtor. This document, the Application for a Liquidation Order, must contain the time and place that the matter is to be heard, the nature and quantum of the claim, and an affidavit of an authorised person speaking for the Creditor, setting out the reasons and justification for the Court to consider the application.

This is not a quick process. Firstly, there is the 15 working days (3 weeks) from the date that the Statutory Demand is served before it matures and is therefore entitled to be used as grounds for insolvency. After that date is passed, and the Creditor recognises that the second step is to be taken, it is likely that a further two to three weeks have passed while the Application is being prepared, and the affidavit is sworn by the authorised person.

Application for a Liquidation Order Process

The Application must then be lodged with the Registrar of the Court that is going to hear the matter and a hearing date assigned for the Application to be heard. That date is likely to be between four and six weeks after the date that the application is lodged with the Registrar.

The next step is that the Application must be served on the Company. This step is normally undertaken by a process server and achieved within one week of the request being made. The time for all steps to be taken before the judge first hears the matter will be at least eleven weeks. As with the Statutory Demand, rules of service, must be strictly adhered to.

How to appoint an Administrator or Liquidator of your choosing

There is an important date to consider at this point. A right is reserved for the shareholders of the Company to appoint their own Insolvency Practitioner but… this right is lost if the action is not taken within 10 working days of the Company being served with the Application for the Liquidation Order. If the Company has been served, don’t let this date slip you by – appointing your own Administrator or Liquidator means that, at the very least, you will be working with someone you have chosen.

While this article explains the track toward liquidation, a much better option is to jump off that track and explore ways to avoid it. A smart move is to make an early enquiry with an expert and learn what your options may be.