Bankruptcy Lawyer Gold Coast - Bankruptcy Options | Stone Group

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Bankruptcy & Insolvency

Cash is king however the significant downturn in recent times has resulted in serious cash flow shortages for many businesses and individuals alike.

Therefore, it has never been more important as a business owner or a company director to understand the financial position of your company to avoid the risk of insolvency. The same goes for individuals who may be at risk of personal bankruptcy.

About Insolvency

A company faces the risk of trading insolvent if it is unable to pay its debts as and when they fall due.

In our experience, warning signs your business, or a business you have dealings with, may be under financial stress and facing insolvency include:

  • reducing sales;
  • inability to pay superannuation;
  • late or unable to pay tax;
  • creditor accounts trading outside terms;
  • troubles recovering debtors;
  • poor or decreased turnover of stock; and
  • demands or other legal notices.

Stone Group Lawyers can provide you with strategic advice to prevent insolvency and we deliver solutions that best suit the company’s needs and unique situation.


The short answer is to be proactive in seeking legal advice, the long answer is as per the below points.

If your company has been issued with a statutory demand, or if you are seeking to issue a statutory demand upon a debtor company, please contact Stone Group Lawyers to arrange a free 30-minute consultation to discuss your matter with one of our litigation specialists.

A statutory demand is a formal demand to collect a debt, under s459E of the Corporations Act 2001 (the Act) and is used by creditors seeking to initiate the winding up of the debtor company. The statutory demand is a means for the creditor(s) to determine whether the debtor company can pay its debt(s) as and when they fall due.

Creditors wanting to initiate a compulsory winding up in insolvency will first serve a statutory demand on the company owing the debt.

Pursuant to section 459E of the Act a person may serve a company with a statutory demand relating to:

  • a single debt that the company owes to the person, that is due and payable and whose amount is at least the statutory minimum; or
  • two or more debts that the company owes to the person, that are due and payable and whose amounts total at least the statutory minimum.

The debt or debts claimed in the statutory demand must total at least the statutory minimum (section 459E(1)), which is currently $2,000.00).

In order to be considered valid a statutory demand must:

  • specify the debt(s) and its amount(s);
  • require the company to pay the amount of the debt within 21 days after the demand is served on the company;
  • be in writing; and
  • be in the prescribed form (found in Schedule 2 of the Corporations Regulations 2001); and
  • be signed by or on behalf of the creditor.

A statutory demand must be served upon the company by:

  • delivering or posting the statutory demand to the company’s registered address; or
  • personally serving it on the company director.

If at the end of the period for compliance (typically 21 days) the company has not complied with the terms of the statutory demand, the presumption that the company is insolvent may arise. Subsequently, the creditor may apply to the Court pursuant to section 459Q of the Act for an Order that the debtor company be wound up.

Pursuant to section 459G of the Act, a company may apply to the Court for an order setting aside a statutory demand, however, this must occur within 21 days after the statutory demand is served upon the company. An application to set aside also requires the debtor company to:

  • file an affidavit supporting the application with the Court; and
  • serve a copy of the application, and a copy of the supporting affidavit, on the person who served the statutory demand on the company.


A statutory demand will only be set aside if:

  • the amount in fact owed is less than the statutory minimum (section 459H);
  • there is a defect in the demand that would cause substantial injustice if the demand is not set aside (section 459J); and
  • there is some other reason why the demand should be set aside (section 459J).

About Bankruptcy

If you have been issued with a bankruptcy notice, or if you are seeking to issue a bankruptcy notice upon a debtor company, please contact Stone Group Lawyers to arrange a free 30-minute consultation to discuss your matter with one of our litigation specialists.


A bankruptcy notice is a demand for payment of money by a creditor from a debtor. A creditor is someone who is owed money. A debtor is someone who owes money.

A bankruptcy notice is usually issued because a creditor has obtained a court judgment or judgments worth $5,000.00 or more against a debtor.

After receiving a bankruptcy notice, you should either:

  • comply with the bankruptcy notice within 21 days of receiving it; or
  • apply to the court to have the bankruptcy notice cancelled within the time stated in the bankruptcy notice.

If you fail to act in accordance with the above, you will be deemed to have committed an act of bankruptcy, which will give the creditor grounds to lodge a creditor’s petition to apply for a court order that you be made bankrupt (this is called a sequestration order).

A bankruptcy notice must be served upon the debtor in one of the following ways:

  • sending the bankruptcy notice in the post, or by a courier, to your last known address;
  • leaving the bankruptcy notice in an envelope at a document exchange (if you have one);
  • leaving the bankruptcy notice in an envelope marked with your name, at your last known address;
  • personally delivering the bankruptcy notice to you; or
  • sending the bankruptcy notice, by fax, email or another type of electronic transmission.

However, if a creditor is unable to serve the bankruptcy notice upon the debtor in accordance with the above, a Court may order that the bankruptcy notice can be served in another way.

The requirements of a valid bankruptcy notice are:

  • the judgment or order relied upon must be to the sum of at least $5,000.00;
  • a bankruptcy notice must be served within 6 months after it is issued unless an extension of time has been granted;
  • a bankruptcy notice must be based on a final judgment or order currently payable to the creditor;
  • enforcement of the judgment or order must not be suspended (for example by the court allowing payment to be made by installments); and
  • the judgment or order on which the bankruptcy notice is based must not be more than 6 years old at the time the notice is issued.

A bankruptcy notice may be challenged on any of the following grounds:


Defect In The Bankruptcy Notice

A Court may order that a defective bankruptcy notice fails to meet the requirements of the Bankruptcy Act 1996 (Cth) in so far as:

  • the debtors and creditors names in the bankruptcy notice should be the same as names provided in the Court judgment upon which the bankruptcy notice is based;
  • the bankruptcy notice must stipulate the address of the creditor, and that address must also be such an address whereby the debtor can attend to payment;
  • the bankruptcy notice must stipulate the time limit for compliance with the notice (usually 21 days);
  • a copy of the judgment or order upon which the bankruptcy notice is based must be attached to the bankruptcy notice;
  • if interest is claimed by the creditor, the calculation of the interest must be detailed in a document attached to the bankruptcy notice; and
  • if you have made past payments toward the debt, the total amount claimed on the bankruptcy notice must reflect these amounts paid.


The Debt Upon Which The Bankruptcy Notice Is Based Does Not Exist

In order to claim that the debt upon which the bankruptcy notice does not exist, you must:

  • have paid the creditor the debt in the judgment or order; or
  • have commenced court proceedings to dispute or set aside the judgment or order.


Counter-Claim, Set-Off Or Cross-Demand

You may challenge a bankruptcy notice on the basis of counter-claim or set-off if:

  • you have a counter-claim, set-off or cross-demand equal to or greater than the amount claimed in the bankruptcy notice; and
  • the counter-claim, set-off or cross-demand could not by law have been pursued in the court proceeding in which the creditor obtained the judgment on which the bankruptcy notice is based.


Abuse Of Process

If you can demonstrate to the Court that the purpose of the bankruptcy notice is to put pressure on you to pay the debt, rather than a genuine effort by the creditor to make you bankrupt then you may be able to get the bankruptcy notice set aside for being an abuse of process.

To apply to set aside a bankruptcy notice you must:

  • file a Form 2 application at the Federal Circuit Court; and
  • file an affidavit in support of the application attesting as to the grounds of the application and noting the date the bankruptcy notice was served.

Free Consultation

At Stone Group Lawyers, we offer all clients for all areas of law a free initial consultation for up to 30 minutes. This consult can be over the phone, Skype or in person.

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