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You’ve just been served with a statutory demand. The clock is ticking. You have 21 days — not 21 business days, not “about three weeks” — exactly 21 calendar days from the date of service to respond. Miss that deadline, and the creditor can apply to wind up your company.
This is one of the most time-critical situations in Australian corporate law. Here’s what you need to know and what you need to do — starting right now.
What Is a Statutory Demand?
A statutory demand is a formal written demand served under section 459E of the Corporations Act 2001 (Cth) requiring a company to pay a debt of at least $4,000 (as of 2024). It is a precursor to winding up proceedings — essentially, the creditor is saying: “Pay this debt, or we will ask the court to shut your company down.”
Statutory demands are a powerful tool. They are relatively cheap to issue, and if you fail to comply or set the demand aside within 21 days, the law presumes your company is insolvent. That presumption of insolvency can then be used to support a winding up application in court.
If you’ve received one, take it seriously. Talk to a statutory demand lawyer immediately.
The 21-Day Deadline: Why It Is Absolute
The single most important thing to understand about a statutory demand is the 21-day deadline. Under section 459G of the Corporations Act, if you want to apply to the court to set aside the demand, your application and supporting affidavit must be filed with the court and served on the creditor within 21 days of service of the demand.
This deadline is absolute. The courts have no discretion to extend it. Not even by one day. The High Court confirmed this in David Grant & Co Pty Ltd v Westpac Banking Corporation (1995) 184 CLR 265.
If you miss the deadline, you cannot apply to set the demand aside. Full stop.
Three Questions to Ask Immediately
When you receive a statutory demand, ask yourself these three questions:
1. Is the Debt Genuinely Disputed?
Do you have a legitimate basis for saying the debt doesn’t exist, or that the amount claimed is wrong? A “genuine dispute” doesn’t mean you need to prove your case — you just need to show there’s a plausible basis for contesting the debt. The threshold was described in Eyota Pty Ltd v Hanave Pty Ltd (1994) 12 ACSR 785 as requiring a dispute that is “real and not spurious, hypothetical, illusory or misconceived.”
2. Do You Have an Offsetting Claim?
Does the creditor owe you money? Do you have a cross-claim, counterclaim, or set-off that reduces or eliminates the amount demanded? If so, this is a ground to set aside the demand under section 459H.
3. Is There a Defect in the Demand?
Was the demand properly served? Does it comply with the prescribed form? Is the amount correct? Is the debt accurately described? Even relatively minor defects can sometimes be grounds to set aside a demand, provided the defect causes “substantial injustice” under section 459J.
When to Engage a Lawyer
The short answer: immediately.
Given the absolute 21-day deadline, every day you delay reduces your options. A statutory demand lawyer can quickly assess:
- Whether you have grounds to set the demand aside
- Whether you should negotiate with the creditor
- Whether you should simply pay the debt
- Whether there are defects in the demand that can be exploited
- What evidence you need to gather, and how quickly
At Boss Lawyers, we have acted on hundreds of statutory demand matters. We understand the urgency and can typically provide a preliminary assessment within 24 hours of receiving instructions.
The Parallel Track Approach: Negotiate AND Prepare
Here’s the strategy we recommend in almost every statutory demand case: run two tracks simultaneously.
Track 1: Negotiate
Open a dialogue with the creditor (or their solicitor). Explore whether the debt can be paid, whether a payment plan is possible, or whether there’s room to negotiate a reduced amount. Many statutory demands are resolved through negotiation without ever going to court.
Track 2: Prepare Your Court Application
At the same time, prepare your section 459G application and supporting affidavit as if negotiations will fail. This means gathering evidence, drafting your affidavit material, and being ready to file and serve within the 21-day window.
Why both tracks? Because negotiations can break down at the last minute. If you’ve spent 18 days negotiating and the creditor suddenly goes silent, you need to be ready to file your court application immediately. If you haven’t prepared, you may find yourself unable to meet the deadline.
The parallel track approach gives you the best of both worlds: the opportunity to resolve the matter commercially, with the safety net of a prepared court application.
What Happens If You Don’t Respond Within 21 Days?
If the 21-day period expires without the demand being complied with (paid) or set aside (by court order), the company is presumed to be insolvent under section 459C(2)(a). The creditor can then apply to the court to wind up the company.
Once a winding up application is filed, you’re in serious trouble. The court will appoint a liquidator unless you can rebut the presumption of insolvency — which means proving that the company is solvent. That’s a much harder position to be in than simply dealing with the statutory demand within the 21-day window.
Common Mistakes to Avoid
- Ignoring the demand. This is the worst thing you can do. The 21-day clock keeps ticking whether you acknowledge the demand or not.
- Assuming you have more time. You don’t. The deadline is strict and cannot be extended.
- Negotiating without preparing a court application. If negotiations fail at the last minute, you’re left exposed.
- Filing an application without proper evidence. A weak affidavit can result in your application being dismissed, with costs awarded against you.
- Paying a disputed debt under pressure. If you genuinely dispute the debt, paying under duress may not be your best option. Get legal advice first.
What Can Boss Lawyers Do for You?
Our team has extensive experience in statutory demand matters across Queensland. We can:
- Provide an urgent assessment of your position within 24 hours
- Advise on whether to pay, negotiate, or apply to set the demand aside
- Prepare and file a section 459G application within the 21-day deadline
- Negotiate with the creditor on your behalf
- Represent you at any court hearing
If you’ve received a statutory demand, don’t wait. Contact Boss Lawyers on 1300 267 711 or visit us at Level 27, Santos Place, 32 Turbot Street, Brisbane QLD 4000.
For expert legal assistance, speak with our insolvency lawyers in Brisbane today.
This is general information only and is not legal advice. You should obtain legal advice specific to your circumstances.
About the Author
Mark Harley is the Principal of Boss Lawyers Pty Ltd, a Brisbane-based commercial law firm. With over 17+ years of experience and more than 3,000 clients served, Mark provides practical, strategic legal advice to businesses and directors across Queensland and Australia.
Contact Boss Lawyers on 1300 267 711 or visit us at Level 27, Santos Place, 32 Turbot Street, Brisbane QLD 4000.
If you are facing an insolvency issue as a director, creditor, or business owner, Boss Lawyers can help. We regularly act in insolvency matters across Brisbane and Queensland, including voluntary administration, liquidation, and director liability claims. Contact us on 1300 267 711.
