Reading time: 3 minutes

Has your company received a statutory demand? A statutory demand is a formal demand to collect a debt, under s459E of the Corporations Act 2001. This article explains what a valid statutory demand is, and how you can respond to a statutory demand.

What is a Statutory Demand?

In short, a statutory demand is used to determine whether a company can pay its debts as and when they fall due.  Creditors wanting to initiate a compulsory winding up in insolvency will first serve a statutory demand on the company owing the debt. To be valid, a statutory demand must:

  • be in writing;
  • specify the total amount of the debt(s);
  • require the company to pay the debt(s) within 21 days after service;
  • signed by or on behalf of the creditor; and
  • be in the prescribed form (found in Schedule 2 of the Corporations Regulations 2001).

You must also serve a statutory demand on the company in the prescribed form by either:

  • delivering or posting the statutory demand to the company’s registered address; or
  • personally serving it on the company director.

My Company Has Been Issued With a Statutory Demand – What Next?

It is critical that you respond to the statutory demand within 21 days of service. If you believe the company should not be required to comply with the demand, you can apply to have the court set it aside.

There are three primary ways to set aside a statutory demand:

  1. if there is a genuine dispute regarding the existence of the statutory demand or amount that is owed;
  2. if the company has an offsetting claim against the party serving the demand, which consequently reduces the debt owed below the statutory minimum (being $2000); or
  3. if there is a defect in the demand which would cause substantial injustice unless the court sets the demand aside.

A supporting affidavit should also accompany the application to set aside a statutory demand. The affidavit’s purpose is to provide evidence supporting why the demand should be set aside.

What Happens if the Company Neither Pays Or Responds to the Statutory Demand?

A company can be presumed insolvent if it fails to either pay the debt or apply to set aside the debt within 21 days. The party serving the statutory demand can rely on the presumption of insolvency and apply to wind up the company.

Although a company can rebut an application for winding up, the onus of proving solvency is strict. Again, you must respond to the statutory demand before 21 days passes.

Key Takeaways

Remember, time is of the essence! You must file and serve on the creditor an application to set aside a statutory demand and the supporting affidavit within 21 days.

LegalVision’s disputes lawyers can assist your company to respond to a statutory demand, or apply to set aside a statutory demand. We can also advise you on next steps if you are unsure how to proceed with the demand. Questions? Please get in touch on 1300 544 755.



Australia’s Global Talent Visa: How to Attract Top Talent

Thursday 7 October | 11:00 - 11:45am

Understand how to navigate Australia’s complex migration system to attract top overseas talent with our free webinar.
Register Now

5 Essential Contracts for your Online Business

Thursday 14 October | 11:00 - 11:45am

Learn which key contracts will best protect your online business with our free webinar.
Register Now

Key Considerations When Buying a Business

Thursday 11 November | 11:00 - 11:45am

Learn which questions to ask when buying a business to avoid legal and operational pitfalls, so you can hit the ground running. Join our free webinar.
Register Now

About LegalVision: LegalVision is a tech-driven, full-service commercial law firm that uses technology to deliver a faster, better quality and more cost-effective client experience.

The majority of our clients are LVConnect members. By becoming a member, you can stay ahead of legal issues while staying on top of costs. From just $119 per week, get all your contracts sorted, trade marks registered and questions answered by experienced business lawyers.

Learn more about LVConnect

Need Legal Help? Get a Free Fixed-Fee Quote

If you would like to receive a free fixed-fee quote or get in touch with our team, fill out the form below.

Our Awards

  • 2020 Excellence in Technology & Innovation Finalist – Australasian Law Awards
  • 2020 Employer of Choice Winner – Australasian Lawyer
  • 2021 Fastest Growing Law Firm - Financial Times APAC 500
  • 2020 AFR Fast 100 List - Australian Financial Review
  • 2021 Law Firm of the Year - Australasian Law Awards
  • 2019 Most Innovative Firm - Australasian Lawyer