For ease of reference, we set out below the full wording of Section 570:
|(i) a creditor, by assignment or otherwise, to whom the company is indebted in a sum exceeding €10,000 then due, has served on the company (by leaving it at the registered office of the company) a demand in writing requiring the company to pay the sum so due, and|
|(ii) the company has, for 21 days after the date of the service of that demand, neglected to pay the sum or to secure or compound for it to the reasonable satisfaction of the creditor,|
|(i) 2 or more creditors, by assignment or otherwise, to whom, in aggregate, the company is indebted in a sum exceeding €20,000 then due, have served on the company (by leaving it at the registered office of the company) a demand in writing requiring the company to pay the sum so due, and|
|(ii) the company has, for 21 days after the date of the service of that demand, neglected to pay the sum or to secure or compound for it to the reasonable satisfaction of each of the creditors,|
|(c) if execution or other process issued on a judgment, decree or order of any court in favour of a creditor of the company is returned unsatisfied in whole or in part, or|
|(d) if it is proved to the satisfaction of the court that the company is unable to pay its debts, and in determining whether a company is unable to pay its debts, the court shall take into account the contingent and prospective liabilities of the company|
It will be noted that a company has three weeks to pay any such sum demanded, otherwise the company is deemed to be insolvent i.e. unable to pay its debts as and when they fall due. Accordingly, the letter of demand is sometimes referred to as a “21 day” letter.
Any company receiving such a letter from a creditor should treat it very seriously, and should seek professional advice. It is possible that if the company subsequently goes into liquidation, that the Section 570 letter will be used as evidence that the company was insolvent at a specific point in time, and that the directors traded “recklessly” beyond that date, and be held personally liable for the debts of the Company.
In some cases, if a creditor does not receive an adequate response to their letter, they might immediately proceed with a High Court Petition to wind up the company. If the company is insolvent, and is no longer viable, then it is better for the directors to immediately cease trading, and to place the company into a creditors’ voluntary liquidation. Company directors who oblige creditors to petition the High Court face a greater possibility of being restricted, pursuant to the Provisions of Section 819 of the 2014 Companies Act. They may also face greater costs.