Insolvency & Restructuring Lawyers Brisbane

What should I do if my Brisbane company is served with a statutory demand?

A statutory demand is a formal written demand, made under section 459E of the Corporations Act 2001 (Cth), that your company pay a debt. It can be used for a debt, or debts added together, of at least $4,000. It is not a court document, but putting it aside is a serious mistake.

From the day the demand is served, your company has 21 days to pay the debt, reach an arrangement the creditor accepts, or apply to a court to have the demand set aside. An application to set aside must be filed, together with a supporting affidavit (a sworn written statement), and copies must be served on the creditor, all inside the same 21 days. The Act says the application may only be made within that period.

A court can set a demand aside where there is a genuine dispute about whether the debt exists or how much it is, or where your company has an offsetting claim against the creditor. If nothing is done and the creditor applies to wind the company up within three months of the missed deadline, the court must presume the company is insolvent, meaning unable to pay its debts when they fall due.

First steps: note the date the demand arrived (demands are often sent to the registered office, so check that address is current with ASIC), gather the invoices, contracts and emails about the debt, and get advice in the first week rather than the third.

How insolvency law works in Queensland

Insolvency law is federal: the Corporations Act 2001 (Cth) covers companies, and the Bankruptcy Act 1966 (Cth) covers individuals, sole traders and partners. ASIC regulates company insolvency and registered liquidators, and the Australian Financial Security Authority (AFSA) administers personal insolvency.

What is Queensland-specific is the ground around those federal rules. If a winding-up or set-aside application is brought in the Supreme Court of Queensland, it runs under the Corporations Proceedings Rules, which sit in Schedule 1A of the Uniform Civil Procedure Rules 1999 (Qld). Under those rules a new matter is started by filing an originating application in the approved form, and the rules also set the form of the affidavit a creditor must attach to a statutory demand that is not based on a judgment.

State debts have their own collector. The Queensland Revenue Office administers payroll tax, land tax and duties, and the State Penalties Enforcement Registry sits within it. It says it considers instalment applications case by case, so a state tax debt is worth raising early.

Directors must prevent the company from incurring new debts while it is insolvent. ASIC explains that a protection known as safe harbour may be available where directors start developing a course of action reasonably likely to lead to a better outcome than the immediate appointment of an administrator or liquidator.

Which Brisbane courts hear winding-up and bankruptcy applications?

For company matters, the Corporations Act 2001 (Cth) gives power to both the Federal Court of Australia and the Supreme Court of a State. In practice the choice is between two registries in the Brisbane CBD.

The Supreme Court of Queensland registry is in the QEII Courts of Law Complex at 415 George Street, Brisbane. The Federal Court's Queensland Registry is on Level 6 of the Harry Gibbs Commonwealth Law Courts Building at 119 North Quay, on the corner of Tank Street, with the pedestrian entrance on Tank Street. These are the registries for businesses in Fortitude Valley, New Farm, Newstead, Bowen Hills and Spring Hill.

Once a winding-up application in insolvency is filed, the Act requires it to be determined within six months unless the court extends that time for special circumstances. If the order is made, a liquidator takes control of the company from its directors.

Personal bankruptcy is different. State courts do not make people bankrupt. A creditor's petition, which is the application asking a court to make a person bankrupt, goes to the Federal Court of Australia or the Federal Circuit and Family Court of Australia (Division 2), which share bankruptcy jurisdiction under section 27 of the Bankruptcy Act 1966 (Cth). In Brisbane both operate from the Harry Gibbs building on North Quay.

Queensland builders and subcontractors: QBCC exclusion and security of payment

In Queensland, a building licence is tied to solvency. Section 56AC of the Queensland Building and Construction Commission Act 1991 (Qld) sets the rules; the QBCC's guidance calls the trigger an insolvency event. The QBCC explains that a person becomes an excluded individual if they become bankrupt, enter a Part IX debt agreement or Part X personal insolvency agreement, or were a director, secretary or influential person of a construction company when, or at any time in the two years before, a provisional liquidator, liquidator, administrator or controller was appointed or the company was wound up. The Act has an exception for a former officeholder who can satisfy the QBCC that the company was solvent when they left. The exclusion lasts three years from the event. The QBCC says the person's licence will be cancelled, they cannot be a director, secretary or influential person of a licensed company, and two separate events may mean life exclusion.

So for a Queensland builder, choosing between liquidation, administration, restructuring or bankruptcy is also a decision about keeping a licence.

Security of payment cuts the other way. Under the Building Industry Fairness (Security of Payment) Act 2017 (Qld), a payment dispute can be decided by an adjudicator on application to the QBCC's adjudication registrar. Under section 90, an adjudicated amount must be paid within five business days after the adjudicator gives the respondent a copy of the decision, or by a later date the adjudicator sets. If it is not paid, the claimant can file the adjudication certificate in court as a judgment debt. A company facing a statutory demand based on a judgment debt will generally find it harder to argue that the debt is genuinely disputed.

Personal debts: bankruptcy notices, creditor's petitions and the alternatives

If you owe money personally, including under a personal guarantee, the process usually starts with a court judgment against you. A creditor holding a final judgment or order of $10,000 or more that is no more than six years old can apply to AFSA for a bankruptcy notice. Once it is served you generally have 21 days to pay, reach an agreement with the creditor, or apply to the court to set aside the notice or the judgment behind it. Read the notice itself, because AFSA says the timeframe can differ in some instances.

Not complying is an act of bankruptcy. The creditor then has six months from that act to present a creditor's petition. If the court makes a sequestration order, which is the order that makes a person bankrupt, a trustee takes control of certain assets. AFSA says bankruptcy normally lasts three years and one day. Where a court made you bankrupt, the Act counts the three years from the filing of your statement of affairs, so that form should not be left undone.

There are alternatives under the Bankruptcy Act 1966 (Cth): a Part IX debt agreement, a Part X personal insolvency agreement, and temporary debt protection, which gives 21 days in which unsecured creditors cannot take enforcement action. AFSA cautions that applying for temporary debt protection is itself an act of bankruptcy a creditor may later rely on. The National Debt Helpline (1800 007 007) offers free financial counselling.

Is insolvency in Queensland different from New South Wales or Victoria?

The deadlines and thresholds are identical across Australia because they come from federal Acts. What changes is the courthouse, the procedural rules and the state overlay. A Queensland company deals with the Supreme Court of Queensland and its Corporations Proceedings Rules, the Queensland Revenue Office for state taxes, and, for builders and trades, the QBCC's exclusion rules and adjudication registry. Other states have their own licensing regulators and security of payment Acts, so material written for another state should not be relied on for a Queensland licence or payment claim.