What to do when served with a creditor’s statutory demand?
Firstly, don’t panic (straight away). Think clearly.
For starters, it is a good idea to understand exactly what a creditor’s statutory demand (“the demand”) is?
Our related blog page is a good place to start? It explains what a demand is in some detail. That blog should be read if this is the first time your business has received such a demand.
But, make no mistake, a creditor’s statutory demand can have very serious consequences.
You, the director, must immediately action it by following the steps as suggested below. Otherwise, in consultation with ourselves, action the demand using our free introductory review.
Once you’ve read this present blog and you know what a creditor’s statutory demand is, the focus moves to what now? What to do next?
But first ….
Who, what, when, where, why, how?
It’s a useful practice in business to always be considering these pointed questions.
But, they are probably best considered before a creditor’s demand is received. Ideally when or before a debt is incurred.
Our separate blog on good debt practices may also be a helpful place for a business, particular if the director thinks it may be headed for a cashflow squeeze?
Having however incurred a debt, and now having been served with the demand, the director must consider what next?
The questions above are a helpful place to start.
- Who is making the demand? Did you business incur a debt from this entity? Was the debt actually incurred by the business that is named on the demand? If not, the demand may be able to be set-aside, or better still, maybe the creditor will withdraw it without much fuss? The demand’s requirements, discussed in another blog, are highly precise with no leeway for error.
- What is the demand saying your company owes? Demands can only be issued to corporations, so if you’ve received a demand against you personally then it will not be of any effect. Additionally, the amount owed must be for at least $2000. If the debt is under $2000 presently, the demand is of no effect. Assuming the demand is made out to the correct legal entity and is in excess of $2000, read on.
- When was the demand served on your premises? This is both a technical and legal question. If the article has come through the post (in the ordinary course of postage) the item is presumed to have arrived several days after post mark on the envelope. It’s always an excellent idea to retain the envelop with the post-mark. This can be very useful. Is some instances, we’ve been able to get very large creditor’s statutory demands set aside for minor deficiencies (see blog – ATO v GSFPA link). Can you answer this when question precisely?
- Where was the debt incurred, where is the jurisdiction of the loan, tax debt or other facility? This is less relevant, but in some cases it can make a difference where the demand was served, where it was sent from (if posted from overseas), where it was left (if it wasn’t served at the company’s premises). If in doubt as to whether procedures have been complied with, call us for your free initial review appointment.
- Why – why is the demand being used now? Is the debt out of time? Why is the demand being used rather than other debt collection techniques – this can be a very important question particularly if the debt was ever disputed (see our good practice blog).
- How? How was it served? How long ago was it served? How was the debt incurred? This last one is often highly relevant. Whether a debt such as a PAYG or GST ATO tax debt has been incurred over several months or longer, or has continued to grow over time – can suggest bigger overall issues within the business? For instance, if a business has been unable to fully pay its super, GST or PAYG ATO debt on time each quarter, or when due, the company may need to look more closely at itself? Is the company trading profitably? Is the owner taking too much in drawings? Are overheads too high? Are fixed or variable costs too high? Our advisory service can offer a range of excellent solutions to a business to enable them to restructure and avoid cashflow issues, insolvency and worse. A free introductory business review is available to assess a company’s issues and potential solutions.
After answering these questions, act.
It is critically important, after receiving a creditors statutory demand that the company does not ignore it (and hope it goes away).
Yet some business owners can be embarrassed to discuss these issues with their accountants.
The law provides only a short period after receipt of the demand to take action – so it is critical that action is not delayed.
Our service is judgement free and focussed very much on solutions to the present problem.
Our available solutions are often more comprehensive than merely negotiating an extension of time to pay the ATO.
If your company has received a creditors statutory demand and is unable to, or unwilling to pay the claimed debt, call us to schedule a free appointment – obligation free – on 1300-327123 (1300-DCP123), click our free appointment scheduling link, or complete the form below.
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