I've Received a Statutory Demand
A statutory demand is a formal demand for payment of a debt of at least $4,000 served on a company under section 459E of the Corporations Act 2001. If you do not comply with it or apply to have it set aside within 21 days, the creditor can use it as the basis for a winding up application against your company. The court will presume your company is insolvent. This is not a debt collection letter -it is the first step toward having your company wound up.
What You Need To Know
You have exactly 21 days from the date of service to either pay the debt, reach an agreement with the creditor or file an application to set the demand aside. The court cannot extend this deadline.
If you do nothing, the creditor can file a winding up application in the Federal Court. The failure to comply with the statutory demand creates a presumption of insolvency that is very difficult to rebut.
To set aside a statutory demand, you must demonstrate a genuine dispute about the existence or amount of the debt, or an offsetting claim that equals or exceeds the demanded amount.
The threshold for a 'genuine dispute' is relatively low -you do not need to prove your case, only that there is a plausible basis for disputing the debt.
The application to set aside must be filed in court AND served on the creditor within the 21-day period. Filing alone is not sufficient.
Statutory demands are frequently used tactically in commercial disputes. They can be set aside if served for an improper purpose or if there is a defect that would cause substantial injustice.
What To Do Right Now
Note the date of service immediately
The 21-day clock starts from the date the demand was served on your company, not the date you personally saw it. Check how it was served and calculate the exact deadline.
Do not ignore it
Ignoring a statutory demand is one of the most dangerous things a director can do. After 21 days, the presumption of insolvency arises automatically. Once a winding up application is filed, your options narrow dramatically.
Assess whether the debt is genuinely disputed
Is there a genuine reason to dispute the debt? Were the goods or services defective? Is there a contractual dispute? Do you have a cross-claim or set-off? These are grounds to set the demand aside.
Consider your director duties
If your company is or may become insolvent, you have personal duties under the Corporations Act not to allow the company to incur further debts. Trading while insolvent exposes directors to personal liability.
Get legal advice within days, not weeks
Given the 21-day hard deadline and the need to both file and serve any application, you need legal advice as early as possible. Leaving it to the last few days creates avoidable risk.
How We Can Help
We act for companies that have received statutory demands and for creditors seeking to enforce them. We prepare and file applications to set aside statutory demands, negotiate settlements within the 21-day window and defend winding up proceedings where necessary. We also advise directors on their personal exposure and duties when the company's solvency is in question.
You have 21 days from service. The court cannot extend this deadline.
Don't wait until your options narrow.
We can usually assess your position within a single consultation. Call us or send an enquiry and we will get back to you promptly.