Nothing will stop a business owner dead in their tracks like a letter from Inland Revenue that contains “statutory demand” inside. It is unsettling to say the least. Most business owners know that this is one of the most serious steps the IRD takes against a business. The most important thing to remember when it comes to a statutory demand is that time is of the essence. It is time to move quickly. Principle Insolvency is here to talk about what a statutory demand is and what your next step should be.
Understanding a Statutory Demand
If you are unsure what a statutory demand means for your company, it is a formal written notice that is issued under the Companies Act 1993. When you get a statutory demand, it means that you owe a specific creditor the money owed in a specific timeframe. Any creditor who is owed more than $1,000 can issue one. This is a signal that the legal process that includes liquidation is approaching. If you don’t reply to the creditor in that timeframe, the creditor has a right to apply to the High Court for the liquidation process to begin.
The Statutory Demand Timeframe
When you get a notice in the mail of statutory demand, it is incredibly unsettling. The main thing that you need to remember is that you must respond to the demand. You usually have 15 working days from the time that you take possession of the written notice. This is a legal timeframe that must be acknowledged. If your company is placed in liquidation, your options are much narrower. Here are your options when receiving statutory demand:
– If your company has the funds to pay the debt in full, this is absolutely the step you should take when you receive a statutory demand.
– You can also negotiate a payment arrangement with the IRD within that 15 working day window. This isn’t something to be taken lightly. You need to provide a cash flow forecast and a structured repayment plan to be given this option.
– Last, but not least, you can ask the High Court to set the debt aside. However, this is only an option if you can prove that you have a genuine dispute over the debt owed, you have a counterclaim against IRD that is either equal to or exceeds the debt, or there is another reason that this is a defective demand. You must submit this to the court within 10 working days of getting the statutory demand notice.
Insolvency Services in Auckland, Hamilton, Levin & New Zealand Wide
If you have received a statutory demand recently, you can turn to Principle Insolvency for help. We will help you navigate this process and help you understand the options that are available to you. We want to help your business in the best way possible. If you are insolvent or need to enter liquidation, we can help you with that as well. Call us today!