On 1 July, changes were implemented to increase the statutory minimum amount for a creditor’s statutory demand from $2,000 to $4,000. This is implemented with amendments to section 5.4.01AAA(1)(b) of the Corporations Regulations 2001. The 21-day period in which the debtor is able to respond to the creditor’s demand remains the same under these amendments.
These changes are intended to account for inflation and for the expiration of the limitations on statutory demands introduced in response to the effects of COVID-19 on the solvency of businesses and individuals. These provisions increased the time for a debtor to be able to provide a response to a statutory demand from 21 days to 6 months and increased the amount required from $2,000 to $20,000. This expired on 1 January this year, which likely saw an increase in debt recovery actions by creditors.
These changes could limit the potential avenues for creditors with debts under $4,000 to recover money owed to them. Worse still, if a creditor makes an application for a debt under $4,000 the court may set aside the claim and make an order for costs, potentially doubling the value the creditor is out of pocket.
If you would like to discuss the debt recovery processes for you and your business, please do not hesitate to contact us.
This blog is merely general and non-specific information on the subject matter and is not and should not be considered or relied on as legal advice. Coutts is not responsible for any cost, expense, loss or liability whatsoever to this blog, including all or any reliance on this blog or use or application of this blog by you.