Statutory Demands and Debt Recovery

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If a company has an outstanding debt a Statutory Demand for payment can be made under Section 459E of the Corporations Act 2001 (Cwth).  This is a powerful action as it can form the basis of winding up the company if the demand is not met.  Because the company insolvency will date back to the date of issue of the Statutory Demand it can have a substantial effect on anyone trading with the company after the Statutory Demand has been made.

Recently the Court of Appeal in Commonwealth Bank of Australia -v- Garuda Aviation Pty Ltd (2013) confirmed that a Statutory Demand can be made for a portion of a debt due and owing.

The failure of the company to comply with a Statutory Demand creates a rebuttable presumption of insolvency pursuant to Section 459C(2)(a) of the Corporations Act.

For the above reasons the issue of a Statutory Demand against a company usually results in an immediate response.

However a Statutory Demand should not be issued against a company where a genuine dispute exists regarding the outstanding debt.  To do so is likely to result in grave and undesirable consequences for the Claimant.

For further information contact Malcolm McColm at MMLaw.

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The content published in this Blog is in the form of academic papers and the opinions expressed herein are generalised. The information provided is for educational purposes, not specific legal advice.

The application of any principles referred to can alter from case to case and accordingly you should seek independent legal advice in respect of your individual circumstances.

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