So let’s say you’ve been served with a statutory demand.
You’ve examined the situation and decided that negotiating a resolution is the best bet.
The terms are largely agreed, but you’ve got this looming problem: if the statutory demand expires, then your company will be presumed insolvent.
And while you might settle your deal with the immediate antagonist, you’re concerned that somebody else might decide to opportunistically leap on the expired statutory demand and try to bring winding up proceedings.
So what do you do? Can a statutory demand be withdrawn? If so, what’s the best way to make that happen?
Can A Statutory Demand be Withdrawn?
Unhelpfully, the Corporations Act under which a statutory demand is issued provides precisely zero guidance on withdrawing such a demand.
Consequently, for a long while, many people were concerned that a demand, once issued, could not simply be withdrawn at will.
Fortunately, that’s not the case – a statutory demand can be withdrawn. It’s simply a matter of making sure you do it right.
What follows are the legal requirements and practical considerations when withdrawing (or asking someone to withdraw) a statutory demand.
In short, the best practice to secure a withdrawal of a statutory demand is to ensure the withdrawl is:
- in writing;
- clear and unequivocal; and
This should be fairly self-explanatory but always get the withdrawal of a statutory demand in writing – from the correct party!
Apart from anything else, getting written confirmation is the only sure-fire way to demonstrate that you’ve met the other two criteria we’re about to discuss.
Clear and Unequivocal
There needs to be no doubt at all that the demand has actually been withdrawn.
So phrases like “will consider withdrawing the demand” aren’t good enough in this situation.
Similarly, it needs to be clear what is being withdrawn.
Best practice then is to ensure that the withdrawal:
- refers clearly to the precise statutory demand that is to be withdrawn;
- states expressly that the demand “is hereby withdrawn”; and
- is signed off by the same authorised person who issued the demand in the first place (if possible).
It’s common for a resolution about a statutory demand to involve a series of steps, such as:
- I pay you money;
- You withdraw the statutory demand; and
- We release each other from further claims.
The challenge here is to ensure that step 2 (the withdrawal) is expressed in a way that doesn’t require further action to occur.
So, for example, “upon payment being received Party A will withdraw the statutory demand” does not, itself, actually withdraw the demand – it requires Party A to do something else (that is, send another letter withdrawing the demand).
And if they don’t do that, you’ve handed over the money but are still going to be left with a presumption of insolvency.
So if you’re negotiating, the deal needs to involve either:
- The demand being withdrawn immediately – although this can be commercially challenging since most people won’t do it without the payment first; OR
- A statement that the demand is definitely and unambiguously withdrawn immediately upon the happening of an event that you control.
This will be up to your lawyer to help you phrase correctly depending on the deal that is being done. The main thing ensuring it is obvious how, and when, the demand is withdrawn – and that nobody needs to take another step for that to happen.
Been Served with a Demand?
While it sounds simple, getting these steps right can be challenging in a practical sense.
So if you’ve been served with a statutory demand we do generally recommend you get lawyers involved to help negotiate a resolution, or if not to take the necessary steps to get it set aside.