Cash is king however the significant downturn in recent times has resulted in serious cash flow shortages for several 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.
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:
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:
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:
A statutory demand must be served upon the company by:
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:
A statutory demand will only be set aside if:
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:
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:
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:
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 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:
Counter-Claim, Set-Off Or Cross-Demand
You may challenge a bankruptcy notice on the basis of counter-claim or set-off if:
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: