To commence wind up proceedings, a Judgment is not required to be entered. In order to proceed to wind up a company, a Creditors Statutory Demand in compliance with s 459E of the Corporations Act 2001 (Cth) is required to be served on the registered office of a company.
In order to proceed with a Creditor’s Statutory Demand, the debt amount is required to be above the threshold amount of $2,000.00.
A Creditor’s Statutory Demand is required to be supported by an affidavit sworn by an authorised representative of the company certifying the amount of the debt due and payable. However, a supporting affidavit is not required when a Judgment has been obtained in an Australian Court and is attached to the Creditor’s Statutory Demand.
Once the Creditor’s Statutory Demand has been prepared and executed, it is required to be served on the debtor company at its registered office. It is important that an up-to-date company search be conducted immediately prior to preparing and executing the Statutory Demand.
I have served the Statutory Demand, what’s next?
Once the Creditor’s Statutory Demand has been served, the debtor company will have a period of 21 days to either:
- Respond to the Statutory Demand;
- Pay the amount set out in the Statutory Demand; or
- Apply to the Court for the Statutory Demand to be set aside.
Should the debtor company fail to do any of the above options within the required 21 days, this will provide a presumption of insolvency and therefore, you will be at liberty to commence wind up proceedings in the Supreme Court of your state or the Federal Court of Australia against the debtor company.
It is important to note that wind up proceedings may only be commenced within 3 months from the date the debtor company has failed to comply with the Creditor’s Statutory Demand served upon it. After such time, a further Creditor’s Statutory Demand will be required to be served upon the debtor company.
In order to commence wind up proceedings, an Originating Process, together with the required supporting affidavits and documentation, is required to be filed in Court. A substantial filing fee is payable to commence such proceedings – showing that commencing wind up proceedings is not an action that should be taken lightly.
Once filed, the documents are then required to be served upon the debtor company.
At the first return date before the Court of the wind up application (which is listed on the sealed copy of the Originating Process), the Court will review the affidavit evidence relied upon by you and advise of any irregularities or absent information.
Should all requirements be satisfied by the Court, a wind up order will be granted against the debtor company immediately placing the debtor company into external administration and appointing a liquidator as at the date of the Order being made.
Wind Up Order entered!
Upon the granting of a wind up order, the debtor company will be placed under external administration and a liquidator will be appointed to the debtor company. A liquidator will proceed to undergo several investigations in order to realise any amounts that may be recovered in order to pay a dividend to creditors of the debtor company.
If you are a creditor of a debtor company, it is important to take steps to immediately lodge a proof of debt form with the liquidator.
It is vital that the information provided in the Creditor’s Statutory Demand is correct and in accordance with the guidelines in order to avoid providing the debtor company the opportunity to seek for the Statutory Demand to be set aside on the basis that it is invalid.
Alike bankruptcy proceedings, there is a great deal of technicalities and guidelines that determine the information required to be provided to the debtor company and the Court, we recommend that you seek legal assistance to proceed with wind up action. In this regard, contact Matthews Folbigg for specialist advice in bankruptcy proceedings.