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Creditor’s Statutory Demand Threshold: What It Is and How to Use It

By Kim Nguyen, Solicitor of Matthews Folbigg Lawyers, in our Insolvency, Restructuring and Debt Recovery Group.

On 15 February 2021, the Treasury released a consultation paper “Increasing the Statutory Demand Threshold” seeking submissions on the appropriateness and impacts of permanently increasing the statutory demand threshold. The consultation period expired on 5 March 2021, however, further information can be found here.

What were the temporary changes?

In response to COVID-19, Federal Parliament introduced insolvency reforms to support small businesses in financial distress.  In March 2020, the Government passed the Coronavirus Economic Response Package Omnibus Act 2020 (Cth) (Coronavirus Act) which temporarily:

  • Increased the statutory minimum debt(s) based on which a creditor can issue a statutory demand from $2,000 to $20,000;
  • Extended the period within which the company may respond from 21 days to six months.

The purpose of the reform was said to be to reduce the pressure upon companies that were struggling to pay their debts.
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Winding Up Applications and the Extension of Time

By Darrin Mitchell, Senior Associate at Matthews Folbigg in the Insolvency, Restructuring and Debt Recovery Group

Section 459R(1) of the Corporations Act 2001 (Cth) (“the Act”) requires that an application be filed to wind up a company, and for it to be determined within six months of filing. Should that six month period expire, the application can be dismissed without the orders sought being made.

However, there is provision for the six month period to be extended under section 459R(2) of the Act, if the applicant can satisfy the Court that special circumstances exist.

These time limits compare unfavourably with the Bankruptcy Act 1966 (Cth), which allows 12 months for an application for a sequestration order to be determined and the ability to extend the application for up to a further 12 months.

In the New South Wales Supreme Court, His Honour Justice Hamilton has said in relation to an application to extend time under section 459R of the Act:
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