When you are running your own business, the last thing you need is to have clients who aren’t paying their bills. But what can you do about it?  In this article – the third in a series about debt recovery for small business – Emily Shoemark and Gene Schirripa discuss statutory demands.

Statutory demands

A statutory demand is a formal demand under the Corporations Act that can be made when a company owes another person or company money, and the person who is owed the money believes that the debtor may not be able to pay its debts.
A statutory demand can only be made against a company, and the debt must be over $2000.
If a statutory demand is made, the debtor is required to either pay or dispute the debt within 21 days. If neither is done, the person who issues the demand can apply to the Court to have the debtor company wound up. This is because, under the legislation, if there is no response there is a presumption that the company does not have enough funds to pay its debts.
This can be a very effective debt recovery method if a company owes you money but is ignoring all attempts to recover the debt, and you are concerned that the company may be in financial trouble.
There are very strict formalities that must be complied with for a statutory demand. You should also not use this method if you know there is a dispute about the debt, as the debtor company can make an application to the Court to set it aside and there could be costs ordered against you.

How can we help?

If you’d like to find out more about ways to ensure that your clients pay your invoices on time – and when they don’t, how to go about debt recovery – contact our Business Law team on 02 6285 8000 or by email.
To read parts 1 and 2 in the series, please click on the links below:
How can I get my clients to pay my bills on time? Part 1 – Terms and conditions
How can I get my clients to pay my bills on time? Part 2 – Letters of demand and security of payment plans