When a company has a debt that is due and the company has the funds to pay it, the creditor will sometimes issue a statutory demand that helps them get what is rightfully theirs. However, this isn’t a decision that should be made without careful consideration. If the company fails to pay the debt within 15 business days, it will become insolvent. At that point, the situation is much different and the liquidation process gets underway. There are several reasons why a company might not comply with a statutory demand though. Principle Insolvency is here to talk about some of the reasons why a company might challenge a statutory demand from a creditor.
Reasons to Challenge a Statutory Demand
There is more than one reason that a debtor might challenge a statutory demand made by a creditor. We would like to take a closer look at some of these common situations.
– Disputing Debt: Sometimes, there is a contest to the amount of debt that is stated in the statutory demand. It is valid that a debtor challenges the demand when they don’t feel that the debt is fair or accurate.
– Wrong Jurisdiction: Sometimes, the debtor may argue that the case should be heard in the Disputes Tribunal.
– Defective Demand: If the statutory demand doesn’t include all the necessary information and forms necessary to make the demand in the first place, the demand may be deemed defective.
– Procedural Errors: There are certain steps that must be followed when issuing a statutory demand. If there are missteps in the process and protocol isn’t followed, it can be used as a defense in the challenge against the statutory demand. This can even include an attempt service to the wrong address.
– Set Off Counterclaim: Some companies might have a counterclaim that is completely valid. If this is the case, they have a strong defense against the demand.
– Legal Defenses: Each case is different, but sometimes there are other legal defenses that are available depending on the circumstances of the case.
What Needs to be Done When the Statutory Demand is Invalid
If the debtor has deemed the statutory demand invalid, they have 10 business days to file a note to set aside which explains, in detail, why the statutory demand isn’t valid. After that, the demand is in the court’s hand. They will determine who pays and how much they pay to settle the debt. If that can’t be done, insolvency occurs and the liquidation process gets underway.
Insolvency Services in Auckland, Hamilton, Levin & New Zealand Wide
If you are concerned that you have debts that you aren’t available to pay, remember that there are professionals like the team at Principle Insolvency that can help you know what your options are and how to move forward. We will help steer you in the way of the most beneficial action you should take. Call us today!