Understanding Statutory Demands in New Zealand
What is a Statutory Demand?
A statutory demand is a formal request for payment of a debt. In New Zealand, it’s a legal tool used primarily by creditors to compel debtors to settle outstanding debts. If a debtor fails to comply with the demand, it can lead to significant legal consequences, including the potential for insolvency proceedings.
Creditors may issue a statutory demand when:
A debtor has not paid a due debt.
The creditor believes the debtor is unable to pay their debts as they fall due.
There is evidence that the debtor is avoiding payment.
1. Preparation of the Demand: The creditor must prepare a statutory demand that includes:
The amount owed.
Details of the debt.
A warning about potential insolvency proceedings if the debt remains unpaid.
2. Serving the Demand: The demand must be served to the debtor:
Personally, or
By registered mail to their registered office or last known address.
3. Debtor's Response: Upon receiving the demand, the debtor has 15 working days to respond:
They can pay the debt.
They may apply to the court to set aside the demand if they believe it’s unjust.
4. Consequences of Non-Compliance: If the debtor does not respond or settle the debt:
The creditor can apply to the court for an order of adjudication in bankruptcy against the debtor.
Debtors have the right to challenge a statutory demand. Grounds for setting aside a demand include:
A debtor has not paid a due debt.
The debt is disputed or not owing.
The demand was not properly served.
The creditor is unable to demonstrate the debt is due.
A debtor has not paid a due debt.
To set aside a demand, the debtor must file an application with the court within 15 working days of receiving the demand.
