How do you force a company to pay a debt?

The usual way to collect a debt is to issue a letter of demand then sue if necessary. However, when it is a debt owed by a company, there is a much faster way, which can also be cheaper.

Under the Corporations Act, a creditor can serve a demand for payment on a debtor company, known as a “statutory demand”. The company then has 21 days either to pay, or to go to court to dispute the debt. If the company does nothing in that period, it is then too late for the company to dispute the debt, and the company can be wound up.

Our policy is that, if the company ignores the demand for 21 days, we prepare the court papers to wind up the company, and send a copy to the company, before filing them in court. This almost always gets a reaction, and usually leads to fast payment of the debt.

Of course, no one wants to actually wind up the company. However, the threat of being wound up usually causes the company to pay.

However, you must be careful. Statutory demands should only be used for an undisputed debt. If the company goes to court within the 21 day period, and disputes the debt, the statutory demand may be set aside, and you will be ordered to pay the company’s costs. The safest rule is that you should issue a statutory demand only when you have an email or other written evidence from the company acknowledging the debt.

Issuing a statutory demand costs $196.00, using our online debt collecting system, and takes no more than a few days.

For more information, contact specialist litigation solicitor Adam Cutri.

 

 

 

 

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