In most common law jurisdictions around the world the most common tool for initiating a corporate bankruptcy from a creditor's perspective is a creditor's statutory demand. In Australia for example, under the Corporations Act 2001 (Cth) there is a standard document which sets out the process for initiating a creditor's insolvency application process. The basic content of a credior's statutory demand is the details of the debt, a warning about the consequences of not responding to the demand, the details of the debtor and the creditor, a warning about the period of 21 days which the debtor has to respond to the demand and a brief outline of the law on which the demand is based.
The reason that a creditor's statutory demand is such a powerful document is that if there is no response within the 21 day period, the creditor may then apply to a court of competent jurisdiction within 3 months of the expiration of the 21 day period to have the debtor company wound up. Within the initial three month period, the court must presume that the debtor company is insolvent if there is no evidence provided to rebut the presumption of insolvency. This is a very important piece of the law in Australia as it means that a creditor can bring a lot pressure to bear on a debtor company in a short period of time by threatening to have them wound up if they do not comply with the creditor's statutory demand. If you would like more information about the creditor's statutory demand document, you can contact the author using the links below.