Quick answer
A statutory demand is a formal written demand under section 459E of the Corporations Act requiring a company to pay a debt of at least $4,000 within 21 days of service. If the company doesn't pay, secure or compound the debt, or apply to court to set the demand aside within that time, it's presumed insolvent and the creditor can apply to have it wound up.
Key points
- Applies to companies only; individuals and sole traders get a bankruptcy notice instead
- The debt, or several debts combined, must be at least $4,000
- The 21-day deadline to apply to set it aside can't be extended by the court
- Non-compliance creates a presumption of insolvency that supports a winding up application
Of all the letters a company can receive, few carry a harder deadline. A statutory demand is a creditor’s formal, prescribed-form notice telling a company to pay what it owes, and it starts a fixed 21-day countdown the moment it’s served. It’s the usual first step before a creditor asks the court to wind a company up.
What makes a demand “statutory”?
An ordinary letter of demand is just a request; it carries no legal consequence if ignored. A statutory demand is different because it’s created by the Corporations Act and follows set rules:
- It’s addressed to a company, identified by its exact name and ACN.
- What’s claimed has to be owed now, not in future, and reach the $4,000 statutory minimum. A creditor may combine several amounts to get there.
- It uses the prescribed form, and where the debt isn’t already a court judgment, it comes with an affidavit verifying the debt.
- It’s served at the company’s registered office or on a director.
Sole traders and partners can’t receive one. Individuals face a separate process under bankruptcy law, where the creditor generally needs a court judgment first and then serves a bankruptcy notice, which has its own, higher minimum of $10,000.
The 21-day timeline
| When | What it means |
|---|---|
| Day of service | The clock starts, even if nobody opens the envelope that day |
| Days 1 to 21 | Pay it, secure it, compound it, or lodge a set-aside application with the court and serve it on the creditor |
| Day 22 onward | If nothing is done, the company is presumed insolvent |
| Within three months | That presumed insolvency can be used to support a winding up application |
The deadline to apply to set aside is absolute. Courts have consistently said they can’t extend it, so an otherwise strong dispute can be lost by filing a day late.
Three ways a company typically responds
It disputes the debt. If the amount is genuinely contested, or the company has a counterclaim against the creditor, the usual move is an application to set the demand aside. Borrowing to pay a debt you don’t owe rarely makes sense.
It owes the money and can pay. Paying in full ends the matter. When the money exists but is locked in property, unpaid invoices or inventory, a short-term loan can bridge the gap. Banks are the cheapest option where the timing works, though a 21-day window is tight for most bank approvals. Property owners often use a caveat loan or second mortgage, which can fund in days.
It owes more than it can manage. If this demand is one of many, borrowing may only delay the problem. Formal options such as small business restructuring or voluntary administration are worth discussing with a registered liquidator before the deadline passes.
If the debt is real and you need to clear it before day 21, tell us the amount and the deadline.
An illustrative example
A shopfitting company in Adelaide is served with a demand for $27,400 by a joinery subcontractor. The directors accept $19,000 is owed but say $8,400 relates to defective work. Their lawyer files an application to set aside the disputed part on day 16. Separately, they pay the undisputed $19,000 using a short unsecured loan sized from their bank statements. The creditor’s leverage disappears and the remaining dispute is settled through negotiation rather than in a winding up court.
Our situation page on what to do when you’ve received a statutory demand works through funding choices in more depth.
Related terms: creditor, insolvency, liquidation, garnishee notice.
Need funds before the 21 days run out?
Speed matters with a statutory demand, and so does getting the right kind of loan the first time. A quick online enquiry, about a minute of your time, gets the ball rolling. Asking doesn’t involve pulling your credit report, and what you send stays with our team rather than being auctioned off to whoever bids. A specialist checks the demand amount, your security and your deadline, then calls you directly. Please include the date the demand was served and an honest picture of other debts, so the option we bring you can genuinely settle in time.
Frequently asked questions
Is a statutory demand a court document?
No. It's prepared and served by the creditor, usually through its lawyer, in the prescribed form. No court has looked at the debt at that stage. The court only becomes involved if the company applies to set the demand aside, or if the creditor later applies to wind the company up.
How is a statutory demand served?
Usually by leaving it at or posting it to the company's registered office, or by delivering it to a director. That's why keeping your registered office details current with ASIC matters; a demand sent to an old address you never check can still be validly served.
Can a statutory demand be set aside?
Yes, on limited grounds: a genuine dispute about the debt, an offsetting claim that reduces it below $4,000, or a defect in the demand that would cause substantial injustice. The application and a supporting affidavit must be filed and served on the creditor within 21 days of service.
What does 'secure or compound' the debt mean?
Securing means giving the creditor security it reasonably accepts, such as a charge over assets. Compounding means reaching an agreement, like a settlement figure or instalment plan, that the creditor is reasonably satisfied with. Get any arrangement in writing before the deadline.
Can the ATO issue a statutory demand?
Yes. The ATO can serve statutory demands on companies for unpaid tax debts, and it has used them as part of its firmer debt collection approach. The same 21-day timetable applies.