As of 1 July 2021, the Federal Government announced the statutory minimum for statutory demands has doubled from $2,000 to $4,000.*
What is a statutory demand?
A statutory demand is a document served by a company under section 459E of the Corporations Act 2001 (Cth) where they demand payment of a debt or debts that are due and payable to it by a company debtor. There are certain legislative requirements which must be met to ensure a statutory demand is valid.
Why are these changes important?
Previously, a statutory demand could only be issued for $2,000 and the debtor company had 21 days to respond. In March 2020 there were temporary changes to the statutory minimum and statutory period (as a result of COVID-19) which have been discussed in our previous two articles.
However, from 1 July 2021 the amount of the debt, or if there is more than one debt, the total of the amounts of the debts, must exceed $4,000 but the minimum statutory period to respond to a statutory demand will remain at 21 days.
Whilst the statutory minimum has increased to $4,000 as of 1 July 2021, the temporary increase of $20,000 for the statutory minimum and 6 months for the statutory period for companies eligible for temporary restructuring relief will still apply up until 31 July 2021. This essentially means that for the period of 1 July 2021 to 31 July 2021 there will be two different statutory minimums and periods that could apply to statutory demands.
Have you been served with a statutory demand?
Failure to comply with a statutory demand, reach an agreement with the creditor about the debt or apply to have it set aside within the minimum statutory period can lead to the presumption that the company debtor is insolvent and allow the company who served the statutory demand to apply to wind up the company debtor. Given this minimum statutory period will likely be 21 days, if you have been served with a statutory demand then it is important to attend to this as soon as possible.
If you have received a statutory demand strict timeframes apply and you should seek advice immediately. Reach out and get in touch with one of our commercial lawyers who can talk you through the process and how we can assist you.
* This is a result of the Corporations Amendment (Statutory Minimum) Regulations 2021 (Cth).
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