A Creditor’s Statutory Demand (or commonly referred to as a CSD) is a technical letter of demand. It is issued per section 459E of the Corporations Act 2001 (Cth) against corporate entities where the issuing creditor has good reason to believe that there is no dispute in relation to the debt owed.

A CSD can be either supported by a Judgment of a court or an Affidavit and the demand must meet the statutory minimum amount of $4,000.00.

How Does a Creditor’s Statutory Demand Work?

The CSD provides a notice period of 21 days in which the debtor company must act. There are strict rules about service and the calculation from the date on which the CSD is delivered. If no action is taken within those 21 days, a presumption of insolvency automatically arises.

This acts as a short cut and for a strict period of 3 months can be used by either the issuing creditor or any other creditor who becomes aware of an expired CSD.

What Happens Next?

A presumption of insolvency means a company is presumed to not be in a position to pay its debt as and when they fall due. This then supports a creditor making an application to the Court to wind the company up and appoint a liquidator.

A liquidator has extensive powers to enable him/her to realise (recover or sell) the company’s assets and to also ask tricky questions of the directors such as: Where did all the money go?  Monies realised are then disbursed between all known unsecured creditors.

If a company owes you a debt equal to or greater than $4,000.00, use of a CSD may be suitable. It is not an everyday debt collection tool, but when used properly it can be highly effective.

Has your company been served with a Creditor’s Statutory Demand?
Find out what you need to urgently do by reading EL's Knowledge Centre article 

If you need to discuss your company's debt recovery options, get started by making an appointment with EL's Principal Legal Advisor - Disputes, Kirsten Woolston:

☎️ | (07) 4646 2621
✉️ | Submit an Online Request

If you have received a Creditor’s Statutory demand DO NOT DELAY! It is essential that you act and immediately seek legal advice.

The 21-day time limit is very strict and time starts ticking from the moment of delivery to your registered office. This may mean that you already do not have the full 21 days and your options decrease in proportion to the amount of time you have left.

1. Be Alert, Not Alarmed

The first step will be to ascertain WHEN exactly the Creditor’s Statutory Demand was served upon your Company’s registered office. A date stamped on the received envelope can be useful. Otherwise, if it was posted to your street address, please keep the envelope as it may be possible to utilize the Australia Post tracking number to ascertain the delivery date.

2. Does It Really Matter If I Don’t Know The Exact Date?

It might. The 21-day time frame is strict and cannot be extended. At the expiration of the 21-day time frame a ‘presumption of insolvency’ automatically arises and the presumption exists for 3 months. This presumption can expose your company to an application to the Court for an order that the Company be wound up and a liquidator appointed. Besides losing control over your company and its bank accounts, assets, existing business networks and good will, this can also have adverse consequences on you personally as a director.

3. What Are My Options?

a) Call your Enterprise Legal advisor as soon as possible. We will ascertain whether:

i. the Demand is technically compliant with the legislation;
ii. the Demand was properly served; and
iii. the debt is disputed.

b) Depending on those results, most options include:

i. Pay the demand in full and satisfy the debt;
ii. Instructing Enterprise Legal to write that the debt is disputed and include available evidence in support, note any technical failings and demand that the Creditor’s Statutory Demand be withdrawn; or
iii. File and serve a Supreme Court application to have the Creditor’s Statutory Demand set aside.

All 3 of the available options MUST occur within the 21-day period, otherwise your company will be statutorily presumed insolvent. There is an exponential increase in costs to save your company after the 21-day deadline has passed.

Have you been served with a Creditor's Statutory Demand?
Front-foot it by making an appointment with EL's Principal Legal Advisor - Disputes, Kirsten Woolston to discuss your options:

☎️ | (07) 4646 2621
✉️ | Submit an Online Request

A Letter Of Demand Can Help You Recover Your Debts 

Minor Debts Are Not Minor Problems

Minor debts can be the cause of many sleepless nights for small to medium business owners. The problem is that while an amount owed to you might cause inconvenience to you should you not recover it, it might not be so large a sum that you want to incur further costs engaging a lawyer or a debt recovery agency to collect your money, especially when that might cost more than the actual debt!

In some aspects, it is simply easier to write the debt off. However, those minor debts can add up and if you are consistently writing off $5,000.00 to $10,000.00 every other month, this will cause significant detriment to the viability of your cash flow and business. 

Good Reasons to Send a Demand Letter

Having a formal Letter of Demand issued by a law firm sends a clear message that you are serious about recovering the debt and will not be so easily dismissed. The purpose of the Letter of Demand is also two-fold - first, it puts the debtor on notice of your intention to commence legal proceedings unless payment is made within a stipulated time frame. Secondly, the Letter can be used as evidence in subsequent court proceedings as written proof of your attempt to settle the matter early.

The Letter will also clearly set out the parameters of the dispute and may even account for any offset due. The Letter should attach a copy of any agreement, invoices or relevant text messages to assist any reader to identify the transaction and the liability to pay. This often assists in reducing the scale of the dispute to something more easily managed and addressed.

It is also our experience that you as a client feel emotionally better about the situation, after having decided to send a Letter of Demand. Having a trusted and knowledgeable advisor to discuss the problem with puts the problem into perspective. Often just having a plan and set steps to follow removes the stressful burden of figuring out what to do next by yourself.  

What are the Possible Outcomes from Sending a Letter of Demand?

The best result is receiving prompt payment from the debtor, with a side benefit of tightening up your trading terms and conditions to reduce the risk of debts arising again.

Another outcome is the creation of ‘industry reputation’. It may be to your benefit for your general customers to know that you are serious about being paid for your services and that you are willing to engage legal assistance when required. This perception is worth every metaphorical penny, as it can weed out the time wasters and non-payers from the very beginning.

Frequently though, no response nor payment is received. This at least crystallises your available options and we can let you know the costs associated with each subsequent step. The true power of a demand letter is being prepared to act on the foreshadowed step of commencing proceedings, otherwise the debtor may simply be calling your bluff.

Our highly experienced Disputes team at Enterprise Legal provides a full debt recovery service and can assist you from reviewing your contracts and debts, to sending Letters of Demand (at fixed fee rates) all the way through to commencing proceedings and obtaining Judgments, a winding-up Order or sequestration (bankruptcy) orders against a Debtor. 

If you need assistance, Enterprise Legal will work collaboratively with you and financial advisors to assist to limit the damage whilst also ensuring your legal rights and interests are protected.

Contact EL’s Principal Legal Advisor – Disputes, Kirsten Woolston to discuss your options today: 

☎️ | (07) 4646 2621
✉️ | Submit an Online Request

“Words are free. It’s how you use them that may cost you.”

The monetization of digital social platforms like Facebook, Twitter, TripAdvisor, True Local or other referrer platforms, means that a few ill-chosen online comments can now have global reach and permanent consequences. 

Opinions and views (informed or ludicrous) are freely published, and such words can significantly harm a person – be it reputational or financial. This is easiest to see in the growing industry of ‘influencers’, where the individual’s reputation is intricately linked to their financial worth. 

In Queensland, if you are on the receiving end of false and damaging statements (known as Publications), you may have the right to commence proceedings for defamation even if the publication was physically made outside of Queensland.

Defamation

Defamation occurs when a false statement is published which harms your reputation. Defamation on social media has become a regular occurrence and a growing problem, resulting in recent legislative changes.

On 1 July 2021, the Defamation (Model Provisions) and Other Legislative Amendment Act 2021 (Qld) came into force and amended the Defamation Act 2005 (Qld). One of the most significant changes is the introduction of section 10A which requires that an individual has no cause of action for defamation unless the individual proves that the publication has caused, or is likely to cause, serious harm to the reputation of the individual.

For ‘excluded corporations’, which are businesses with 9 or less staff, it must prove the publication has caused, or is likely to cause, serious harm to the reputation of the business, and serious financial loss.

The new result is that minor or trivial reputational harm alleged to be caused by a defamatory publication will no longer give rise to a cause of action in defamation.

It is possible to extend a finding of defamation beyond the original publisher. This means that if another person shares or tags the original post, or adds comments to the post, or even ‘likes’ it or responds with an emoji (such as an angry or laughing face), each action can constitute a separate publication and can see each person liable for defamation.

Time Limits

In Queensland there is a limitation period of 12 months from the date of publication and any court action must be commenced within those 12 months, otherwise the claim is statute barred.

10 or More Staff

Businesses with 10 or more staff cannot file a claim for defamation and are required to make a claim for ‘injurious falsehood’.

To be successful in an injurious falsehood claim:

1. actual measurable financial loss attributable to the publications, is required; and
2. the motive of malice to harm your businesses’ reputation by the publishing party, must be proved.

Don't Panic

If you or your business has been the target of defamatory comments, we recommend that you make a printed copy of the publication and make a note of the date and time of the online post. You may also wish to do a search of several platforms to see if the comments were limited to one online platform or several and monitor these for several days.

You can reach out directly to the host of the platform for assistance, but generally limited assistance will be provided.

The Defence of Contextual Truth is a complete defence to a claim of defamation, so ensure that you undertake appropriate investigations as to the accuracy or falsity of the Publications as soon as you become aware of the publication. Keep notes regarding your investigative process and conclusions. You may also need to speak with your financial advisor to assess sustained financial losses.

If the post is not removed within several days, please contact us promptly to obtain legal advice as the sooner you act, the better the available outcomes. 

If there is sufficient harm warranting progressing the matter, then a Concerns Notice under section 12B of the Act will need to be issued before any court proceedings can commence. This is a new requirement of the recent amendments.

As at the date of this article, section 35 of the Act limits damages for non-economic loss to a maximum of $250,000.00 which is to be awarded only in the most serious of cases. Exemplary or punitive damages cannot be awarded but any awarded damages are to bear a rational relationship to the harm caused.

Do you need professional advice in relation to defamation? Enterprise Legal can work collaboratively with your financial and marketing advisors to assist to limit the damage caused whilst also ensuring your legal rights and interests are protected. Contact EL's Principal Legal Advisor - Disputes, Kirsten Woolston to discuss your options:

☎️ | (07) 4646 2621
✉️ | Submit an Online Request

Its been a hard slog the last few years for anyone trying to manage a business. Between the fires, floods and Covid-19 pandemic, many small and large business owners are thinking what could possibly be next on the horizon which might cause their doors to shut.

Well, we can tell you: it’s the Australian Taxation Office.

1. The ATO Has Woken From Its Hibernation

As at 30 June 2021, the ATO’s debt book jumped by 77.6% to $34.1billion, with small business taxpayers accounting for the majority of the overall debt book at 62.6%, or a whopping $21.4billion.

It is anticipated that the final reports for EOFY 2022 will see that upwards trend continue. The difference going into financial year 2022/2023 compared to the previous 2 financial years, is that the ATO is on a self-declared mission to recoup as much of the collectable debt as possible. 

The ATO has commenced actively pursuing those debts, most notably issuing a first tranche of 50,000 Director Penalty Notices addressed to directors at their home address. The letters warn of the personal consequences on directors for their company’s non-compliance of tax obligations.

2. Directors Have A Target On Their Back

The best way to avoid attracting unwanted attention from the ATO is to be proactive and ensure that the company’s reporting is accurate and meets all its relevant deadlines. Answering your accountants’ questions promptly and returning the calls of your bookkeeper are basic everyday tasks which will help manage the company’s affairs.

However many directors, usually sole directors, have little understanding of a director’s duties under the Corporations Act. We also find that they have little insight into the company’s overall financial position and have been treating company funds as a personal bank account (this is why the accountant has been calling!). Add in late lodgements and tax arrears with accruing interest, the seriousness of the situation is not fully appreciated by the director, even upon receiving a Director Penalty Notice.

We are hearing reports that many sole directors try to simply walk away from their business, thinking that closing up shop is a quick and easy way to make the pain go away and that the Notice will simply ‘dissolve’.

Unfortunately, no. 

If an issued Director Penalty Notice is not complied with and the amount remains unpaid, within 21 days from the date of the Notice (NOT the date of receipt of the Notice), the Director/s may become personally liable for the debt and the ATO can and is commencing proceedings against directors personally.

This means your Home could now be in the firing line, as is the savings account for the children’s school fees. This is as about as serious as it gets.

3. Director Penalty Notice (DPN)

There are 2 types of DPNs:

i. A Non-Lockdown or Standard DPN

These are issued when a company has lodged the required returns in time, but has not yet paid the amount owing.

ii. A Lockdown DPN

A company has not lodged the GST / PAYG or Superannuation Guarantee Statement (SGC) returns, or not lodged within the required timeframe.

Both types only provide 21 days from the date of the Notice in which to act and the best of the limited options available is: pay the debt within the 21 days.

If you receive a DPN, the director should seek specialist advice from an accountant or insolvency practitioner immediately to understand what options are available, otherwise you might find yourself paying back those creditors personally.

If you need assistance, Enterprise Legal will work collaboratively with you and your financial advisors to assist to limit the damage whilst also ensuring your legal rights and interests are as protected as possible.

Contact EL’s Principal Legal Advisor – Disputes, Kirsten Woolston to discuss your options today: 

☎️ | (07) 4646 2621
✉️ | Submit an Online Request