Don’t sit on a S459E statutory demand…you lose negotiating leverage and could lose your company

If your company is ever served with a Statutory Demand under s459E of the Corporations Act (those demands are being served on companies all the time) and you dispute the Demand in full or in part, you must respond to the Demand within the 21 days allowed or your company will be deemed to have committed an act of insolvency. You will know if it’s a demand under S459E, because the demand will state that.

If you have grounds to set the demand aside but choose to ‘sit on it’ until the last moment, you may be jeopardising the viability of your company. Act early and quickly.

A 2015 case highlights the risk. In Adhesive Pro Pty Ltd v Blackrock Supplies Pty Ltd [2015] ACTSC 288, the company’s representative acted late such that its application to set aside the statutory demand was filed with the Court on the 20th day, but not released for service upon the creditor until the 24th day, thus rendering the application invalid as it was not able to be served within the required 21 day period.

This was despite the company’s attempt to avoid such consequences by serving an unsealed copy of the application on the creditor.

The potential consequences of failing to act within the time limits are serious from both legal and practical perspectives. Once the time limit has passed the creditor will be able to file a winding up application with the Court and your company might well have lost any leverage it otherwise would have had to negotiate a deal.

Should you receive a statutory demand and wish to apply to set it aside please contact one of our Commercial Litigation & Dispute Resolution Lawyers without delay, act early and quickly.