Presumption of Insolvency if Demand is Unpaid
The test of whether or not a company is insolvent under Section 95A of the Corporations Act is whether or not the company is able to pay its debts as and when they become due.
Under Section 459C of the Act, a company is presumed to be insolvent if, during or after three (3) months preceding the day on which an application is made for the winding up of the company, one of a number of events occurred including, most commonly, failure to comply with a Statutory Demand.
In other words, if a debtor company fails to respond to a Statutory Demand - the company is presumed insolvent and the creditor can easily and quickly move to lodge a winding up application that would result in the appointment of liquidators.
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