Statutory Demands: A Debt Collection Tool?

Posted May 13, 2014 9:40 am

A Statutory Demand is a formal written request for payment of debts owed by a company, issued pursuant to Part 5.4 of the Corporations Act 2001 (Cwlth) (‘Act’). The core intention of the relevant legislation is to prevent companies from trading whilst insolvent, and thereby incurring further debts which will not be repaid. It is an initial step in the winding up process. However, there is a tendency by some entities to use Statutory Demands as a debt collection tool. This paper will explain briefly how Statutory Demands work, and then consider the circumstances in which it is appropriate to use them.