Statutory Demands & Winding Up

Under this section of the Act, our team helps clients understand their rights. under section 459E of the Corporations Act 2001 (Cth), a statutory demand must be in the prescribed form (Form 509H), relate to a debt of at least $4,000 that is due and payable, be served on the company in accordance with section 109X of the Act, and be accompanied by an affidavit verifying the debt and confirming compliance with the Act. The demand must clearly state the amount of the debt, the basis of the debt, and the 21-day compliance period. Technical errors in the form or verification process are common grounds for setting aside a demand.

At our firm, a company served with a statutory demand has 21 days to apply to the Supreme Court of Queensland to have it set aside. The court may set aside the demand if there is a genuine dispute about the existence or amount of the debt, or if the company has an offsetting claim. The threshold for a genuine dispute is relatively low — the company need only demonstrate a plausible contention requiring investigation, not prove the dispute on the balance of probabilities. The company must also demonstrate a material injustice if the demand is not set aside. Legal advice should be sought immediately to avoid missing the 21-day deadline.

At our firm, if a company fails to comply with a statutory demand within 21 days, it is presumed to be insolvent under section 459C of the Corporations Act 2001 (Cth). This presumption allows the creditor to apply to the Supreme Court of Queensland for a winding-up order. The winding-up application must be filed within 3 months of the non-compliance. The company can defend the winding-up application by proving solvency or by demonstrating a genuine dispute existed. If a winding-up order is made, a liquidator is appointed and the company's affairs are administered for the benefit of all creditors.

No, our team advises that statutory demands under section 459E of the Corporations Act 2001 (Cth) can only be issued against companies. For individual debtors, the equivalent mechanism is a bankruptcy notice under the Bankruptcy Act 1966 (Cth), which requires compliance within 21 days and, if not complied with, constitutes an act of bankruptcy. A creditor's petition can then be presented to the Federal Circuit and Family Court of Australia (or Federal Court) seeking a sequestration order. The debt must be at least $10,000 for a bankruptcy notice and $5,000 for a creditor's petition.

At our firm, a winding-up order has serious consequences for company directors. The liquidator takes control of the company's affairs, and directors must cooperate by providing books and records, attending examinations, and reporting on the company's affairs. Directors may face personal liability for insolvent trading under section 588G of the Corporations Act 2001 (Cth), unremitted PAYG withholding or superannuation guarantee obligations, and potential examination by the liquidator about the company's financial affairs. ASIC may also investigate and pursue director disqualification proceedings.