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Statutory Demand

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The Australian Treasury describes a statutory demand as… A notice made by a creditor under the Corporations Act on a debtor company. As the name suggests, a statutory demand demands the payment of a debt.

One is a demand pursuant to a judgement debt, the other is a demand for a single debt. The precedents come with commentary covering:

  • Statutory Demands – overview of practice and procedure
  • What is a statutory demand?
  • Requirements of a Statutory Demand
  • Formal requirements of a Statutory Demand

The precedents set out the formal requirements of a Statutory Demand in basic form.

This must be accompanied by affidavit, pursuant to section 495E (3) of the Corporations Act 2001, unless it is a judgement debt.  It is good practice to accompany all Statutory Demands by affidavit. An Affidavit is included in this precedent set.


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What is a Statutory Demand

A statutory demand is a formal, written request for payment of a debt, issued under specific legal provisions, typically as part of bankruptcy or insolvency proceedings. It is a serious legal document used to demand the payment of a debt from an individual or company. If the debtor fails to pay the debt or come to an arrangement to settle it within a specified period (usually 21 days), the creditor can use the statutory demand as evidence to petition the court to declare the debtor bankrupt (if an individual) or to wind up the company (if a business).

Key Characteristics of a Statutory Demand

  1. Formal Legal Document: It is a formal notice that adheres to specific legal requirements and procedures.

  2. Debt Details: The demand specifies the amount of the debt, the nature of the debt, and how it arose.

  3. Deadline for Payment: The debtor is given a set period (typically 21 days) to pay the debt, settle it, or dispute it.

  4. Consequence of Non-Compliance: If the debtor does not comply with the statutory demand, the creditor can use this as a basis to petition the court for bankruptcy or winding up of the company.

When to Use a Statutory Demand

  • Unpaid Debts: When a creditor is owed a debt that has not been paid despite previous attempts to collect it.
  • Legal Leverage: To exert legal pressure on the debtor to pay the outstanding amount.
  • Precursor to Bankruptcy or Liquidation: As a preliminary step before initiating bankruptcy or winding-up proceedings.
Key Components of a Statutory Demand

Key Components of a Statutory Demand

  1. Creditor Information: Details of the creditor issuing the demand.
  2. Debtor Information: Details of the debtor who owes the debt.
  3. Debt Description: A detailed description of the debt, including the amount owed and the circumstances under which it arose.
  4. Payment Deadline: A clear statement of the time frame within which the debt must be paid, usually 21 days from the date of the demand.
  5. Consequences: Information on the consequences of not complying with the demand, including potential bankruptcy or liquidation proceedings.
  6. Payment Instructions: How and where the payment should be made.
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