Companies are required by the Corporations Act to be solvent. A company that is not able to pay its debts when they become due is deemed to be insolvent.
A company can be wound up in a number of ways under the Corporations Act. A common method for a creditor to wind up a company is by issuing a statutory demand. A statutory demand does not require an order or judgment to be obtained, but does require a person to give evidence that the debt is due and payable. That means that there should be no possible dispute regarding the debt.
If there is are any potential grounds for a debtor to dispute a debt a statutory demand should not be issued. If there is a dispute, a debtor should issue an application to set aside the demand within the 21 day period or the company will be deemed to be insolvent. The 21 day period is fixed and cannot be extended unless by order made prior to the 21 days expiring.
Commonly, statutory demands are set aside where a genuine dispute regarding the debt is found to exist. The finding does not need to be as to the dispute itself, just that a dispute exists. Debtors are therefore able to raise even a small minor problem, that will require further investigation and therefore result in a statutory demand being set aside.
Hopkins Lawyers is experienced in both issuing a statutory demand for payment and also applying to the Court to have them set aside. If you require any further information please contact Kristine Hopkins on 03 9607 8279.