A Statutory Demand can look like another legal letter, but it carries much sharper consequences. For company directors, the key issue is the 21-day deadline. For creditors and advisers, the key question is whether this is the right recovery tool for the debt.
TL;DR: A Statutory Demand is a formal request for payment of a company debt. If the company does not pay, negotiate, or challenge it within 21 days, it is presumed insolvent, and the creditor can apply to the court to wind it up.
What Is a Statutory Demand?
A Statutory Demand is a formal document issued by a creditor to a company that owes a debt. It is used when the creditor says the debt is due, payable and not genuinely disputed.
If you are a business owner, getting a Statutory Demand is serious because the deadline is tight and strictly enforced. For creditors, sending one can put real pressure on a company, but it should be used with care.
When Can a Statutory Demand Be Issued?
A creditor can issue a Statutory Demand if the company owes at least $4,000, the debt is due and payable, and there is no genuine dispute about it.
Clear, Liquidated and Undisputed Debts
This process is best for debts that are clear, for a set amount, and supported by documents. If the debt is unclear, disputed, or there is an offsetting claim, another recovery pathway may be safer.
Who Can Issue a Statutory Demand?
Any creditor owed money by a company can issue a Statutory Demand. This includes suppliers, lenders, landlords, contractors, judgment creditors, or the ATO.
For accountants and lawyers advising creditors, procedural accuracy matters. The demand must use the right form, be served correctly, and include an affidavit unless the debt is already a judgment debt.
Section 459E of the Corporations Act sets out the requirements for a valid statutory demand and is worth checking before issuing one.
Received a Statutory Demand? Here’s What You Can Do
If your company receives a Statutory Demand, act immediately. The 21-day deadline starts from when the demand is served, and options become limited fast.
Option 1: Pay the Debt
If the debt is valid and the company can pay, payment can resolve the immediate risk. Also consider if paying one creditor creates broader cash flow or insolvency concerns.
Option 2: Negotiate With the Creditor
You might be able to negotiate terms, settle, or ask for withdrawal. Any deal must be clearly documented and finalised within 21 days.
Option 3: Apply to Set Aside the Statutory Demand
To set it aside, apply to the court within the required timeframe. Common reasons include a real dispute about the debt, an offsetting claim, or a significant defect.
What Happens If the Debt Cannot Be Paid?
If the company does not meet the demand or get it set aside, it is presumed insolvent. This lets the creditor ask the court to wind up the company.
What Happens When a Company Goes Into Liquidation in Australia?
If the court orders liquidation, a liquidator takes over the company, sells its assets, examines its affairs, and pays creditors as required by law. Directors lose control, employees may be affected, and the liquidator can review directors’ actions and the company’s transactions.
For creditors, liquidation does not always mean they will get paid. If the company has few assets or secured creditors are ahead in line, the amount recovered may be small.
Get Advice Before the Deadline Drives the Outcome
A Statutory Demand brings real business risk. Directors must act quickly, and creditors and advisers should verify suitability and accuracy before using it.
SALEA Advisory helps business owners, creditors and advisers understand restructuring, recovery and insolvency pathways. If you have received a Statutory Demand or are considering sending one, contact SALEA Advisory to discuss your options.
