With the upcoming Christmas and New Year public holidays, it is important to know that the wheels of the business world do not stop spinning because of the festive season.  During this period, it is not uncommon for creditors to issue statutory demands to debtor companies, in an attempt to have them expire during a business closure period.

What is a statutory demand?

A statutory demand is a formal written demand sent by a creditor to a company requesting debt(s) to be paid.  A company that is served with a Statutory of Demand has 21 days after being served with the statutory demand to resist the demand, by applying the courts to set it aside, or comply with it by paying the demanded amount in full.

How do you calculate 21 days?

If a debtor does not respond within the 21 day period, there is simply no mechanism to enable a court to extend this period.  It is therefore paramount that a debtor understands that the 21-day period, will include Christmas and New Year periods, weekends, or any public holidays.

The simplest way to determine the days, is to count the days on a calendar, with day 1 being the day immediately after you were served.

Consequences of not complying with the 21-day period

If a company fails to comply with the Statutory of Demand or fails to apply to set aside it within the 21 day period, a company will be presumed insolvent. Within 3 months of the date of non-compliance, the creditor who serves the statutory demand may rely on the insolvency presumption and apply to the court to wind up the debtor company. If a company then wishes to resist the wind up application, it will likely incur substantial costs in proving its solvency.

Key takeaways and reminder

1. 21-day compliance period after being served with a statutory demand includes all weekends and public holidays.

2. A company that fails to comply with the 21-day period may be presumed insolvent.

BG Legal & Advisory will be open during the holiday period and are able to assist with the enforcing of any of your rights within the holiday time.

*Disclaimer: This is intended as general information only and not to be construed as legal advice. The above information is subject to changes over time. You should always seek professional advice beforetaking any course of action.*

Continue onto Part 2 here...