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ARTICLE · 11 MARCH 2022

Proving solvency after a company has failed to comply with a statutory demand

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If the statutory demand is ignored, the company is deemed to have committed an act of insolvency and may be wound up.

AustraliaInsolvency/Bankruptcy/Re-Structuring
Catherine Ballantyne
Catherine Ballantyne

Statutory demands are serious documents and should never be ignored.

What if I ignore a statutory demand?

If the statutory demand is ignored, the company is deemed to have committed an act of insolvency and may be wound up. This is unless one of the following occurs within 21 days of service of the statutory demand:

  • The full amount demanded is paid;
  • The company brings Court proceedings to set aside the statutory demand; or
  • The statutory demand is withdrawn in writing.

How do I prove that the company is solvent?

The test for solvency is whether a company can pay its debts as and when they become due and payable. In a recent case1 the Courts have provided some guidance as to what they will consider in determining whether a company is solvent:

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The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances. Madgwicks is a member of Meritas, one of the world's largest law firm alliances.

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