What to do when a company owes you money

What should I do when the company owes me money?

It is a difficult problem to know what to do when a large company owes you money. Often it can be easy to believe that if you are in small business and you find it difficult to collect debts in any situation obtaining debt from a large company will seem like an almost impossible challenge. The company could have highly paid lawyers who will defend their case claim the costs of litigation against you in the deep pockets of the company could threaten to drag out the litigation to make it impossible for you to recover the debts.

However, there is some hope. In Australia the first step to obtaining a debt from a company which has not paid you is to issue a creditors statutory demand. A creditors statutory demand is a document that forces the company to respond to the allegation that it must pay a debt or else face winding up proceedings. Winding up proceedings are a very strong threat to accompany because it means that the company will be placed in the control of a liquidator and the assets of the company will be sold off to pay the creditors. Obviously every company that wishes to continue to exist, will want to avoid winding up proceedings. There can be serious consequences for the directors of the company if the company is liquidated and it is later discovered that the company was trading insolvent. This can expose the directors to an allegation that can be prosecuted by the Australian Securities and Investments Commission. Obviously every prudent director of a company will want to avoid this eventuality. So there is a high probability that they will respond to a creditors statutory demand.

A creditors statutory demand is issued under the terms of the Corporations Act 2001 (Cth). The company must apply to have the creditors statutory demand set aside by a court if there is a genuine dispute as to the terms of the debt which is claimed in a statutory demand otherwise if they do not respond to the statutory demand within 21 days the creditor can prepare an application for winding up by a court and under the Corporations Act 2001 (Cth). Under this law the court must presume that the company is insolvent if it is failed to respond to a statutory demand. For this reason issuing a statutory demand leads to a very high rate of success in recovering debts from companies.