Received a Statutory Demand? Here’s What to Do in the Next 21 Days

If your company has received a statutory demand, you are on a strict 21-day deadline. Missing it could mean your company is presumed insolvent — and a winding up application may follow.

Take a breath. Then take action. You have options, but only if you act now.

What Is a Statutory Demand?

A statutory demand is a formal legal demand served under section 459E of the Corporations Act 2001 (Cth). It requires your company to pay a specified debt within 21 days of service.

If your company does not pay the debt or apply to court to set the demand aside within that 21-day window, the law presumes your company is insolvent. The creditor can then apply to the court to have your company wound up.

This is not a threat — it is the law. And the 21-day deadline is absolute. Courts have repeatedly confirmed that there is no extension, no discretion, and no excuse for missing it.

Your Three Options

Option 1: Pay the Debt in Full

The simplest option. If the debt is undisputed and you have the funds, pay it within 21 days and the demand is satisfied. Make sure payment is received (not just sent) before the deadline.

Option 2: Apply to Court to Set Aside the Demand

If you have grounds to challenge the statutory demand, you can apply to the court to have it set aside. Common grounds include:

• Genuine dispute: There is a genuine dispute about whether the debt is owed (or the amount)
• Offsetting claim: Your company has a claim against the creditor that equals or exceeds the demand amount
• Defect in the demand: The statutory demand contains a defect that would cause substantial injustice if not set aside
• Other reasons: There is some other reason why the demand should be set aside

Critical: Your court application must be filed and served within 21 days. Not 22 days. Not 21 days and one hour. The deadline is strict and courts will not grant extensions.

Option 3: Negotiate

In some cases, you may be able to negotiate a payment plan or settlement with the creditor. However, negotiation does not stop the 21-day clock. If negotiations fail and the deadline passes, you’ve lost your right to challenge the demand. Always protect your position by preparing a court application in parallel.

What Happens If You Miss the 21-Day Deadline?

If the 21-day period expires without payment or a court application:

1. Your company is presumed to be insolvent under the Corporations Act
2. The creditor can file a winding up application in the court
3. Your company may be placed into liquidation
4. A liquidator will be appointed to take control of the company’s affairs
5. The directors’ powers cease immediately
6. The liquidator may investigate the directors’ conduct, including potential insolvent trading claims

The consequences are severe — and often irreversible.

Common Mistakes Directors Make

• Ignoring the demand — hoping it goes away. It won’t.
• Assuming negotiations extend the deadline — they don’t.
• Trying to handle it without a lawyer — the technical requirements are strict.
• Waiting until the last few days — preparing a court application takes time.
• Paying a disputed debt — if you have a genuine dispute, paying under pressure may waive your rights.

Why Choose Boss Lawyers?

Boss Lawyers is a boutique commercial litigation and insolvency firm based in Brisbane. We handle statutory demand matters every week — both issuing and defending them.

• 17+ years of legal experience
• 3,000+ clients served
• Listed in Doyle’s Guide for litigation
• Principal-led service — Mark Harley handles every matter personally
• Urgent response — we understand the 21-day deadline and move fast

Act Now — Call 1300 267 711

Every day you wait is a day closer to the deadline. Call 1300 267 711 now for an urgent assessment of your statutory demand.

We will review the demand, assess your options, and advise on the best course of action — today.

📞 Call 1300 267 711 Now

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Boss Lawyers Pty Ltd | Level 27, Santos Place, 32 Turbot Street, Brisbane QLD 4000

Defects in the Statutory Demand: When the Demand Itself May Be Invalid

Under section 459E of the Corporations Act 2001 (Cth), a statutory demand must comply with strict formal requirements. A failure to meet these requirements can constitute a “defect” — and under section 459J, a court must set aside a statutory demand if a defect exists and the court is satisfied that substantial injustice would be caused if the demand were not set aside.

Section 459E requires the demand to be in writing, signed by or on behalf of the creditor, relate to a debt or debts that are due and payable, specify the amount of the debt, require payment within 21 days, and be in the prescribed form (Form 509H under the Corporations Regulations 2001). A demand for a judgment debt does not require a supporting affidavit; all other demands do.

Common defects that Queensland courts have found to justify setting aside a statutory demand include:

• The amount claimed in the demand does not match the amount in the supporting affidavit or the underlying invoices
• The demand includes amounts that are contingent or not yet due and payable at the date of service
• The supporting affidavit contains false or inaccurate statements, or was sworn before an unauthorised witness
• The demand is not in the prescribed form or omits required fields
• The demand was served on the wrong company, at the wrong address, or in a manner that does not comply with section 109X of the Corporations Act
• The demand is for a debt owed by a related entity rather than the company itself

Challenging a statutory demand on the basis of a defect requires careful legal analysis. Not every imperfection will succeed — the court considers whether substantial injustice would result if the demand stood. But where a creditor has been careless in preparing the demand, these technical grounds can be decisive and can give your company breathing room to address the underlying commercial dispute.

What Happens If You Do Nothing: The Winding Up Sequence

Missing the 21-day deadline is not a mere procedural inconvenience — it triggers a chain of events with serious consequences that are very difficult to reverse. Understanding this sequence is essential to appreciating why the urgency cannot be overstated.

Once the 21-day period expires without payment or a set-aside application:

1. Presumption of insolvency crystallises. Under section 459C of the Corporations Act, your company is presumed insolvent. This presumption can only be rebutted by positive evidence of solvency — financial statements, cash flow forecasts, and accountant’s reports establishing that the company could pay all its debts as they fell due. The burden is on the company to produce this evidence.
2. Winding up application filed. The creditor files a winding up application in the Supreme Court of Queensland. Once filed, the application is publicly searchable through ASIC’s registers. Other creditors, suppliers, banks, and business partners may become aware that your company is subject to winding up proceedings — with potentially serious commercial consequences.
3. Court hearing listed. The Supreme Court lists the application for hearing. ASIC is notified and the application is advertised. Other creditors can file supporting or opposing appearances. The Australian Taxation Office frequently appears in support of winding up applications where it is also owed money.
4. Winding up order made. If the company cannot rebut the presumption of insolvency, the court makes a winding up order. A liquidator is appointed immediately. Directors’ powers cease on the making of the order.
5. Investigation of directors commences. The liquidator investigates the company’s affairs and director conduct. Insolvent trading, unfair preferences, and voidable transactions all come under scrutiny. Personal liability for directors may follow.

Each step in this sequence has the potential to cause irreversible harm to the company, the directors, and the business relationships that the company depends on.

Negotiating a Resolution — How to Buy Time Without Losing Your Rights

Many statutory demands are issued by creditors who ultimately want payment — not a winding up order. In practice, a negotiated resolution is achievable in a significant proportion of statutory demand matters, even after the demand has been served. But negotiation must be conducted correctly to avoid inadvertently losing your legal options.

Key principles for negotiating after receipt of a statutory demand:

• Never rely on verbal assurances. A creditor’s promise to “hold off” or “not take further action” does not stop the 21-day clock unless confirmed in a written agreement to extend time or suspend the demand. Verbal assurances are not legally binding and have caused companies to miss their deadline while believing they were protected.
• Prepare a court application in parallel. Even where commercial resolution looks achievable, your lawyers should be preparing a set-aside application simultaneously. If negotiations break down on day 20, having the application already drafted allows you to file in time. Preparation is not adversarial — it is prudent.
• Document every offer and response in writing. A creditor who unreasonably refuses a genuine commercial offer may face consequences on costs if the matter proceeds to court. A clear paper trail is essential for demonstrating good faith.
• Consider a without-prejudice payment proposal. Offering to pay an undisputed portion, or to provide security for the balance while a genuine dispute is resolved, demonstrates commercial good faith and can provide grounds to resist a winding up application even if negotiations extend beyond the deadline.

Negotiated resolutions can include payment in full, a structured payment plan, a reduced settlement amount, or an agreement to defer proceedings while the underlying commercial dispute is resolved through alternative means — all preferable outcomes to the cost and disruption of winding up proceedings.

If your company has received a statutory demand in Queensland, our insolvency lawyers Brisbane can review the demand, identify grounds for challenge, and advise on the most effective strategy within your 21-day window. Contact Boss Lawyers on 1300 267 711.

This is general information only and is not legal advice. You should obtain professional advice specific to your circumstances.