Enforcing a court judgment can be difficult if the debtor refuses to pay. However, if the debtor is a company and the debt is over $4,000, a creditor can apply to wind up the company. This is a formal insolvency process that can force liquidation so that assets can be distributed to creditors.
The first step is serving a statutory demand. This is a formal notice requiring the company to pay the debt within 21 days. If it fails to comply or set aside the demand, it may be presumed insolvent. Statutory demands should not be used as a general debt collection tool but only as part of genuine insolvency proceedings.
If the company does not comply, the creditor has three months to apply to the Federal Court for a winding up order. This involves filing an originating application and supporting affidavits showing that the debt exists, the demand was validly served, and the company has not responded.
The Court will set a hearing date, and the documents must be formally served on the company. The creditor must also notify ASIC within the prescribed timeframes and obtain the consent of a registered liquidator to act if the order is granted.
At the hearing, the Court considers the creditor’s evidence, any other supporting creditors and the company’s response. If the company is found to be insolvent, a winding up order is made and a liquidator is appointed. The liquidator takes control of the company, investigates its affairs, and distributes assets according to insolvency law.
Winding up is a serious legal process. It is important to seek legal advice before commencing or responding to such proceedings. Seeking professional legal advice early can help you avoid costly mistakes and protect your interests.
At McNamara Law, our experienced litigation and commercial law teams can guide you through every step of the process. We provide clear, practical advice on your rights and obligations. Get the right legal support from a team that understands the complexities of winding up applications. Contact us today on 1300 285 888.https://mcna.com.au/contact/wind up
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