Offsetting claim – Set aside a statutory demand - Part 1

Article Summary

A statutory demand is a powerful mechanism under the Corporations Act 2001 (Cth) that allows creditors to compel payment of debts exceeding $4,000 within 21 days, failing which the company is presumed insolvent.

This process is swift and avoids drawn-out disputes, but safeguards exist for companies through section 459G, which permits applications to set aside demands.

One key defence is the "offsetting claim" under section 459H, which allows a company to assert a genuine counterclaim, set-off, or cross-demand against the creditor.

The claim must be bona fide, arguable, and supported by evidence, though it does not need to be proven at trial.

If successful, the offsetting claim reduces the substantiated debt, and if that amount falls below the statutory minimum, the demand must be set aside.