Give me my money! Changes to Statutory Demands from 1 July 2021 and 1 August 2021
The minimum amount that a creditor must be owed by a debtor company before they can issue a creditor’s statutory demand will soon increase to $4,000.
Currently, a creditor’s statutory demand must relate to a debt of, or debts that total, at least $2,000 unless the debtor company is eligible for temporary restructuring relief under the Corporations legislation, in which case the minimum amount must total at least $20,000. There are obvious complexities for a creditor to navigate, like how would the creditor know if a company is eligible or not!
The changes
From 1 July 2021, the minimum amount will increase to $4,000 unless the debtor company is eligible for temporary restructuring relief.
However, from 1 August 2021, to remove the complexity regarding debtor companies that may be eligible for temporary restructuring relief, the new statutory minimum of $4,000 will apply for all companies (i.e., including those eligible for temporary restructuring relief). This should remove the current uncertainty in this area.
In addition to the changes to the minimum amount, the time for a debtor company to company with a statutory demand issued on or after 1 August 2021 will revert back to 21 days. Currently the time to comply will depend upon whether or not the debtor company is eligible for temporary restructuring relief. This amendment provides much needed clarity for all parties as to the time for compliance.
Do not get it wrong
It is important to be aware of these amendments. If you issue a statutory demand for less than the minimum amount or there is some other technical defect, the demand could be set aside by a Court and you could be exposed to a cost order (which could very well exceed the amount in the very demand you issued!).
If you or your clients need help or advice in this area please do not hesitate to get in touch with our team.
The material in this article was correct at the time of publication and has been prepared for information purposes only. It should not be taken to be specific advice or be used in decision-making. All readers are advised to undertake their own research or to seek professional advice to keep abreast of any reforms and developments in the law. Brown Wright Stein Lawyers excludes all liability relating to relying on the information and ideas contained in this article.