Statutory demand relief set to end

3 September 2020

Temporary Changes To The Creditor’s Statutory Demand Regime Set To Expire In September

In March 2020, the Federal Government introduced temporary changes to the creditor’s statutory demand regime in response to the economic downturn caused by the COVID-19 epidemic. One of the changes was increasing the compliance period for responding to a statutory demand from 21 days to 6 months. The extended compliance period expires on 26 September 2020.

The creditor’s statutory demand regime is a popular tool for unsecured creditors due to the procedural simplicity of issuing a demand and the strictly enforced compliance period meaning that the introduction of the extended compliance period removed one of the most attractive features of the regime.

Creditors who regularly use the regime will have delayed issuing a statutory demand until the expiry of the extended compliance period and there is an expectation among legal practitioners that the volume of demands issued beyond 26 September will be significant.

Notwithstanding the simplicity of the statutory framework governing statutory demands, the volume of litigation flowing from the regime is disproportionate and a vast majority of the disputes relate to service of the demand.

The Corporations Act 2001 (Cth) allows creditors to serve documents on a company by posting the documents to the company’s registered address. Companies served with a creditor’s statutory demand must remain vigilant of documents received at its registered office and will benefit from maintaining accurate records of incoming mail, especially if there is a dispute about service. Companies that use an accountant as their registered office should also ensure that their accountant’s office is open, is receiving mail and that mail will be forwarded to the company promptly once it is received.

It is an interesting time for the creditor’s statutory demand regime, but the message to debtor companies remains the same, act quickly and seek proper advice.

Mahoneys regularly act in creditor’s statutory demand disputes.