The process of issuing a statutory demand goes by a number of descriptors. It is also known as making a statutory demand, sending a statutory demand or sending a creditor's statutory demand using Form 509H. In this blog we discuss the basic of how to go about issuing statutory demands.
Buy a statutory demand Form 509H and affidavit template
If you would like to generate a pdf template of Form 509H and supporing affidavit to account for multiple debts, a reduction in debts, a judgement debt then you can do so with our statutory demand Form 509H precedent (template).
All you need to do is:
- buy our template statutory demand and affidavit
- fill out our online form by answering about ~ 30 questions
- wait for a Form 509 and affidavit in support to be generated in pdf form and then emailed to you (it also includes a basic guide on how to do it); and
- use the template / precedent so generated to customise and create your own document(s)
Alternatively, if you want us to take care of it (rather than complete the online template) then please contact us.
Why issue a creditor's statutory demand?
A statutory demand is akin to an official notice, that has “bite” and is used to recover liquidated debts owed by corporate entities (not individuals).
It can have significant consequences both for the sender and the recipient.
For the sender, it may lead to a court proceeding if the demand is contested. For the recipient it could lead to a presumption of insolvency if it is validly made and not paid by the due date.
Creditors use non-compliance with a statutory demand to try and prove insolvency given its relative simplicity.
Before you issue a statutory demand ensure it is expressed in clear, correct, and unambiguous terms.
Statutory demands are issued (not filed) by a creditor
A statutory demand is issued by a creditor to a debtor company (as opposed to being filed).
Once the demand is finalised it needs to be served upon the debtor in accordance with the relevant rules.
Who issues a statutory demand?
Typically, a creditor uses a statutory demand against a company where:
- It has an unpaid judgement debt i.e. a court order that was not paid.
- It has an unpaid liquidated debt e.g. an unpaid invoice
… there is no real excuse for not paying the amount due and owing.
What are some of the general requirements for issuing a statutory demand?
Outside of the temporary measures implemented as a result of the Covid-19 pandemic the debt must be:
- Statutory thresholds - Generally, the debt must be for at least $2,000 (or more) and the debt must be due and payable. The threshold amount is currently being reviewed by the government and may be increased to $4,000 (see: further reforms)
- Time for compliance - Typically, the time for compliance is 21 days from when you are served with a statutory demand. However, recent changes were made during Covid-19 to assist businesess stay afloat during the period of the pandemic.
Statutory demand changes and Covid-19
During the pandemic, basically from about 25 March 2020 until 31 December 2020, the changes are as follows:
- Temporary Statutory thresholds - debt of $20,000 (or more) and the debt must be due and payable.
- Temporary time for compliance - 6 months from service of the statutory demands.
(the, "Temporary Measures")
From 1 January 2021 to 31 March 2021, the company can continue to have the benefits of the Temporary Measures if the directors to it make a declaration to ASIC if the debtor company is eligible i.e.
- company debts < $1m;
- there are reasonable grounds to believe company is insolvent (or likely to be so);
- none of the company's directors (within the last 12 months) has been a director of another company that has been under restructuring / simplified liquidation (within last 7 years);
- company has not been under restructuring (within last 7 years);
- board of company resolved that a restructuring practitioner should be appointed;
- there is no restructuring practitioner of the company (or restructuring has not yet terminated); and
- the declaration has not expired;
- etc.
To determine if such a declaration was made consult the ASIC Published Notices.
Note that the Government is currently considering whether or not to raise the threshold to $10,000 given that the $2,000 threshold has been in place since about 1992.
Other Requirements for Statutory Demands
Some of the technical requirements for statutory demands include that it must be:
- In writing
- Seek payment within the applicable period. This period can vary because of Covid-19, and temporary legislation.
- Signed by the creditor
- On the right form being Form 509H
- Etc.
Given the technical nature of a statutory demand, it is generally useful to get legal advice.
What does a statutory demand form 509H look like?
The first page looks like this:
Service of a Statutory Demand
Generally, a statutory demand must be served in accordance with the requirements of the Corporations Act 2001 (Cth) see: s 109X. Failure to serve it properly could be fatal to any subsequent application.
Service may be by pre-paid post to the registered office of the debtor or by way of personal service on the debtor company. Each method of service poses some risks in terms of service not being effected such as for instance if the registered addres is abandoned and the sender is aware or if personal service cannot be effected.
It will be necessary to prove service of the statutory demand if it is to be relied upon.
Statutory Demands and Winding up
If the demand is validly made, then:
- It may end up being paid, or
- If not paid, it can be used to facilitate a winding up application.
Should the demand be invalidly made then:
- It may need to be withdrawn, or
- It may be necessary to approach the court to set aside the statutory demand.
- Etc.
Statutory Demands we help with
Our commercial litigation lawyers can help with:
- preparing a creditor's statutory demand
- issuing a statutory demand
- a court application to set aside a statutory demand.
Resources Regarding Statutory Demands
This area of the law has already seen a number of changes during Covid-19 in 2020 with thresholds and time-frames being altered.
As this area of the law is evolving further with more changes foreshadowed it will be very important to obtain legal advice on an urgent basis if you want to issue or set aside a statutory demand.
Here are some resources:
- Temporary relief for financially distressed businesses
- Federal Court Information Sheet 1
- Covid-19 Economic Response
- s 459E of the Corporations Act 2001 (Cth)
- Form 509H in the Corporations Regulations 2001 (Cth)
- Form 7 - Affidavit accompanying statutory demand
- Rule 2.4A to the Federal Court (Corporations Rules 2000 - Application for order setting aside statutory demand
- Extension of temporary relief for financially distressed businesses
- Insolvent Companies - Law Handbook SA
Talk to a Dispute Lawyer today!
* Disclaimer:- This publication contains general information which may not suit your particular needs or circumstances. It may be summarised and include generalisations. Details that may be important in your specific circumstances might not be included. Litigant strives to ensure that the information in this publication is accurate and up-to-date, but does not represent or guarantee that it is accurate, reliable, current, complete or suitable. You should independently evaluate and verify the accuracy, reliability, currency, completeness and suitability of the information, before you rely on it. The information in this publication is not legal or other professional advice. You should obtain independent legal or professional advice that is tailored to your particular circumstances if you have concerns. To the maximum extent permitted by law, Litigant excludes liability for any loss, however caused (including by negligence), relating to or arising directly or indirectly from using or relying on any content in this publication. Litigant asserts copyright over the content of this publication.