Newsflash: threshold for statutory demands raised

Insights1 July 2021

In another move to protect small business owners, the Federal Government has permanently raised the minimum debt required to serve a statutory demand from $2,000 to $4,000, effective 1 July 2021.

In another move to protect small business owners, the Federal Government has permanently raised the minimum debt required to serve a statutory demand from $2,000 to $4,000, effective today.

The increase was introduced by the Corporations Amendment (Statutory Minimum) Regulations 2021 (Cth) (Regulations). The new threshold applies to all statutory demands served on or after 1 July 2021. The 21-day period to comply with a statutory demand remains unchanged.

A statutory demand is a creditor’s formal, written request under the Corporations Act 2001 (Cth) requiring a company to pay a debt. A failure to respond to a statutory demand gives rise to a rebuttable statutory presumption of insolvency. It is common for a creditor to rely on the failure to comply with a statutory demand as a basis to file an application with the court to wind up a company in insolvency.

Notwithstanding the increased threshold, other cost-effective options remain for creditors seeking to recover debts of less than $4,000.

Hall & Wilcox presents a wealth of experience, industry knowledge and strong technical skills when it comes to issues of insolvency and debt recovery.