Government announces increase to threshold for statutory demands and the time period to respond. Also mooted is reduction in personal liability for directors of companies trading while insolvent.

March 22, 2020 |

As part of the Government’s second stage relief package it has announced that it will amend the Corporations Act 2001 to:

  • increase the threshold for issuing a statutory demand from $2,000 to $20,000; and
  • extend the time within which to apply to set aside a statutory demand from 21` days to 6 months.

The Prime Minister’s media statement of earlier today relevantly provides:

The Government is temporarily increasing the threshold at which creditors can issue a statutory demand on a company and the time companies have to respond to statutory demands they receive. The package also includes temporary relief for directors from any personal liability for trading while insolvent.  The Corporations Act 2001 will be amended to provide temporary and targeted relief for companies to deal with unforeseen events that arise as a result of the Coronavirus.

(Emphasis added_

No details have been provided as to what is meant by relief from liability of directors who may trade while insolvent.  It is too cryptic at this stage.  

The pressure of receiving a statutory demand for relatively small debts is lifted, for the time being.  The threshold of $ 20,000 remains within the scope of many existing statutory demands.  Statutory demands for sums a little over $2,000 are issued but they do not make up the majority of statutory demands. 

The sting of statutory demands has been dulled by the long period within which an application to set it aside can be made, now being 6 months.  For those who use statutory demands to get a prompt payment for a (usually uncomplicated) debt from a company, a common motivation, this reduces its attractiveness. 


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