Debt recovery when the debtor is a company

Have you found yourself in a position where you are owed money and the entity that owes you money is a company? If you are looking to recover the debt the most common two options are as follows:

1. Issue initial proceedings in the Magistrates’ Court.

2. Issue a Statutory Demand in order to initiate proceedings in the Federal Court.

In either case, the first step would be to send the debtor a Letter of Demand. This letter puts the debtor on notice that if the outstanding amount is not paid by a specific date, then we have instructions to issue legal proceedings to recover the debt without further notice to them. When proceedings have commenced, interest and costs can also be claimed. Thereafter:

We can issue initial proceedings in the Magistrates’ Court.

1. To commence proceedings, we would file a complaint outlining the debt to be recovered and supporting documentation with the Court. Once filed, we serve the complaint on the debtor.

2. Once the complaint is served, the debtor has 21 days to file a notice of defence. The debtor must serve a copy of the notice of defence on you or us as your lawyer if they intend to defend the claim.

3. If the complaint is defended, the matter will proceed to the Magistrates’ Court.

4. If, after 21 days, the debtor does not file a defence, we can apply for a court order in default of defence. This does not involve attending court.

We can issue a Statutory Demand in order to initiate proceedings in the Federal Court.

1. We would first be required to make a Statutory Demand. A Statutory Demand is a creditor’s formal, written request requiring a company to pay a debt within 21 days of service.

2. If a debtor company is served with a Statutory Demand, it has 21 days from service of the demand to either:

   1. comply with the demand, or

   2. apply to the Court under s459G of the Corporations Act for an order to set the demand aside.

3. If the company fails to comply with the Statutory Demand within the time provided, the company is presumed insolvent under the Corporations Act. Within three months of the date of non-compliance, the creditor who served the demand may rely on the presumption of insolvency as the basis for an application to the Federal Court for orders winding up the company. The effect of the presumption is that the Court must presume, subject to evidence to the contrary, that the company is insolvent and should be wound up.

4. If the debtor does not respond to the statutory demand, then we can issue proceedings in the Federal Court of Australia. Proceedings are commenced by filing an originating process with the Court.

If you think that you are in a position to recover monies owed to you and wish to discuss further your options or the fees involved with the above applications, please contact one of our lawyers on 03 9450 9400 to have a conversation today.