If you receive a Creditor’s Statutory Demand (Demand) from a creditor that also owes your Company money, you may be entitled to vary or set-aside the Demand. 

What should you do?

If the creditor in the Demand owes your Company money, and you believe that the amount demanded does not account for the money owed, you can apply to the Court to set aside the Demand or vary it. This is known as an offsetting claim. The timeframe for this is strict. Just as you only have 21 days after receiving the Demand to pay the debt, you have those same 21 days to apply to offset the debt. To do this, you will need to provide documents to support your claim, such as detailed accounts showing the relationship between you and the creditor.

How does offsetting a claim work?

If the Court is satisfied that an offsetting claim exists, it will use the formula set out below to calculate the correct amount of the debt:

Admitted total (amount claimed in the Demand) – Offsetting total (amount the creditor owes you) 

= Actual Amount of Debt

If the Court calculated debt is less than $2,000, the Court will set aside the Demand.

However, if the Court calculated debt remains more than $2,000, the Court may order that the debt in the Demand is varied. You must then pay the creditor the new varied amount. Failure to do so may result in the commencement of winding up proceedings against your Company. 

If you find yourself on the receiving end of a Demand and believe an offsetting claim exists, give our expert insolvency lawyers at Craddock Murray Neumann a call to discuss your options.

The law is complex and it changes frequently. The law may have changed since this article was published.