CCIn business deals, sometimes one party just won’t pay up.

As a creditor (person who is owed money) one option that is available is to pursue the debtor (person who owes the money) through the court system for payment.

Unfortunately however, sometimes debtors don’t respond to court proceedings.  The issuing of a statement of claim, entering of judgment and enforcing of an order can be a long, and cumbersome exercise.  The debtor gets to keep your money in his pocket for months while you jump through the hoops.

If, however, the party that owes you money is a corporation, there is another very, very effective alternative available to you.

It is called the statutory demand and it works like this:

You send a simple and inexpensive document requesting payment to the debtor company.  If the debtor company does not pay the debt within 21 days, the company can be almost immediately wound up – The company’s life is over.  Trading stops, an administrator is appointed and all the company’s assets are sold off to pay you.

If the debtor company has even a half serious business they will not want this to happen.  It’s not a good outcome for it’s business.

Of course, the debtor company can always object to the statutory demand by refuting the legitimacy of the debt.  But, they have a very strict 21 day deadline in which they are entitled to do so.  They will also have to pay a filing fee of about $2,500 to give a Supreme Court Judge the pleasure of listening to their argument.

It’s the perfect medicine to wake up a sleepy debtor that will not respond to any other prodding for payment.

If the creditor’s entitlement to the debt is straightforward, it will be futile and incredibly expensive for the company to resist.  A smart debtor will simply pay up rather than being wound up.

A statutory demand is a simple document but must be drafted meticulously.  It must be verified, sworn and served in accordance with complicated Corporations Rules.

If a statutory demand contains any defect it can be set aside by the court and the creditor can be ordered to pay for the debtor’s inconvenience.

In order to make sure your statutory demand is done correctly the first time, contact Everingham Solomons, because Helping You is Our Business.

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