If you are a creditor looking to recover money owing to you by a company, you have likely considered sending a Creditor’s Statutory Demand in order to recover the monies owed or wind up the debtor company in order to participate in a distribution of the proceeds of the realisation of the creditor’s assets.

The most common basis for an application for winding up of a company is following the expiry of a Creditor’s Statutory Demand. This is a formal demand that if a debtor company refuses to pay within 21 days of the issue of the Statutory Demand, the company will be presumed insolvent. This then paves the way to make an application to wind up the company.

It is important however that creditors ensure that they adhere to the processes and requirements set out in the Corporations Act 2001 (Cth) to successfully appoint a liquidator to wind up the debtor company.

This article outlines the steps required when applying to wind up a company, as well as some helpful tips to navigate the process effectively.

1. Issuing and Expiry of time to comply with a Creditors Statutory Demand

A Statutory Demand is a formal notice to a company requiring that it pay a debt. There are technical requirements that need to be met to constitute an effective and unchallengeable statutory demand.

Compliance with the legislative requirements includes the Creditor’s Statutory Demand:

specifies the amount of the debt, and what it is owed for;
is over $4,000;
is written in accordance with the prescribed form, which is Form 509H;
specifies that the debtor company must comply with the demand within 21 days;
is signed by or on behalf of the creditor; and
is accompanied by an affidavit in the prescribed form signed no earlier than the date of the Statutory Demand which affirms that the debt is due and payable by the debtor company. This requirements does not apply if your debt is a judgment debt ordered by the court.

The Creditor’s Statutory Demand has to be served on the debtor company by delivering or posting it to the company’s registered office, or by delivering it personally to a director of the company.

After service, the debtor company has 21 days to either pay you, or to apply to the Court to have the Creditor’s Statutory Demand set aside.

If an application is brought to set aside the Creditor’s Statutory Demand the Court may set it aside if:

there is a genuine dispute about the debt (i.e. the amount owed, or if it was owed at all);
the company has an offsetting claim;
there is a defect in the demand as drafted; or
for some other reason.

For the purposes of this article we will assume that there is no application to set aside the Creditor’s Statutory Demand and the debtor company has not complied within 21 days.

The issuer of the Creditor’s Statutory Demand will then have three months from the expiry of the time to comply within which to make an application to the Court to wind up the company and appoint a liquidator.

2. Steps to be taken before filing an application for a Winding Up Order (ASIC extract, preparation of originating process and affidavit evidence, payment of filing fee, service)

Before making an application for a winding up order, an issuer will need to:

Obtain an ASIC extract for the company no earlier than 7 days before filing the winding up application to make sure that there are no winding up proceedings already on foot, the company is not already in liquidation and the company’s registered office has not changed.
Prepare an originating process in the prescribed form;
Prepare affidavit evidence in the prescribed form, attaching a copy of the ASIC extract, addressing:
- how and when the Statutory Demand was served on the company;
- the debtor company’s failure to comply (i.e. to repay the debt);
- whether each of the debts are still due and payable;

An issuer (applicant) can then lodge the documents with the Court. This can be either the State Supreme Court or the Federal Court of Australia.

Some differences in fees payable, costs recovered, length of lists and time to progress the application through the court system arise which should be considered when selecting which Court to apply in. For example at the time of lodgement, you will need to pay a filing fee – as of September 2024 in the:

Victorian Supreme Court this stands at $847.10; and
Federal Court of Australia this stands at $4,930 for a corporation and $1,695 for non-corporate entities and individuals.

These change annually, up-to-date fees can be found on the respective court websites.

3. What happens after the application is filed? (Notification to ASIC, appointment of liquidator, publish notice of application)

Once the application is lodged, the Court generally must make a decision within 6 months or the application will lapse. There is some ability to extend the time period but this is at the discretion of the Court. The Court will set a date for the application to be heard.

After lodging the application, the applying party has a series of steps it will need to take within the specified time periods: These include:

Notification to ASIC

By no later than 10.30am on the following business day after lodgment, the applicant will need to lodge notice with ASIC of the winding up application by using Form 519.
At any time before the hearing, the applicant must also prepare proof (usually an affidavit) confirming that the applicant notified ASIC as above.

Appointment of liquidator

At least one day before the hearing, the applicant must obtain the consent of a liquidator who agrees to liquidate the company if a winding up order is made. The applicant must record their consent in Form 8, and serve and file this form at least one day prior to the hearing.

Publishing notice of application

At least 3 days after the application was served on the company and at least 7 days before the hearing, the applicant must publish notice of its winding up application on the Insolvency Notices page of the ASIC website.
At any time before the hearing, the applicant must also prepare proof (usually an affidavit) confirming that the applicant published the notice as above.

There can be differences between the Courts as to how they will proceed with these winding up applications.

For example: although the requirements above permit parties to complete steps within seven days of the hearing date, the Supreme Court of Victoria requires under rule 16.10 of the Supreme Court (Corporation) Rules 2023 (Vic) that all material is filed in support of an application 7 days before the hearing.

The Supreme Court has the power to dismiss the application if the applying party does not comply. More usually where there has been non-compliance the court will adjourn the hearing to a later date to permit the party time to comply at least 7 days prior to the hearing date with the required steps. This can delay and add to the costs of a winding up application.

4. What to expect at a hearing of the Originating Process

Hearings of winding up applications made in this manner are held by telephone or videoconference. Unless specified otherwise, parties will not have to physically attend court.

An applicant will usually know in advance of the hearing if the debtor company intends to oppose the application, as they are typically required to file materials such as a Notice of Appearance if they wish to do so.

On occasion however, without having filed a Notice of Appearance:

a company director can appear on the hearing day and seek to be heard; and
another creditor can appear and seek to support the application.

If the application is not opposed, the Court will usually order that the company be wound up on the grounds that the company is presumed insolvent with costs awarded as a priority creditor in the winding up of the debtor company.

If there is a supporting creditor then this party will usually also seek to have their costs of the proceeding ordered to be paid as a priority in the winding up of the debtor company.

The winding up order, if made, will be produced by the court electronically within 24 hours.

Other typical situations will include:

the debtor company reaching an agreement with the applicant to pay the debt, and costs incurred to date on the winding up application and the application being dismissed by consent;
the debtor company reaching an agreement with the applicant to pay the debt, and costs incurred to date on the winding up application and seeking to have the application dismissed but a supporting creditor requests the court transfer the winding up application to the supporting creditor to run it as if it was the original applying company thus continuing the winding up application on;
a supporting creditor asking the court to appoint a liquidator other than the liquidator from whom the applicant has filed a consent with the court on the basis of some objection (usually perceived conflict of interest) to the original liquidator;
the application being dismissed if the applicant company does not appear to proceed with the application.

Where a supporting creditor exists this can complicate the situation for an applicant considering an offer that has been made to it by the debtor company.

If for example an agreement is reached between the debtor company and the applicant and money is paid but no similar deal is reached between the debtor company and the supporting creditor a liquidator could be appointed who then seeks to claw back from the applicant the amount paid to it by the debtor company.

These situations need to be navigated with caution by the applicant, often involving discussions with the supporting creditor and the debtor company to consider the consequences of any proposed course of action.

5. Steps to be taken following the making of a Winding Up order

After a winding up order is made, the applicant will need to:

notify the liquidator of the winding up order no later than the following day after the order is made;
within 2 business days, lodge notice with ASIC to inform it of the order by using Form 519;
within 7 days, serve a copy of the order on the debtor company.

Please contact us if you would like more information, would like to discuss any of the above or would like assistance to issue a statutory demand or application to wind a company up.

Alicia Hill
Principal
T: +61 3 9611 0180 | M: +61 484 313 865
E: ahill@sladen.com.au

Inshani Ward
Senior Associate
T: +61 3 9611 0110 | M: +61 413 557 157
E: iward@sladen.com.au