The document that can end a solvent business
A statutory demand arrives — sometimes by post, sometimes by hand, occasionally via a process server at your front door. It looks bureaucratic. It references a debt you may well dispute. And it gives you 21 days to act.
That 21-day window is one of the hardest deadlines in Australian commercial law. Miss it, and the company is presumed insolvent. That presumption can be used to wind up the company, and courts are reluctant to set it aside after the fact regardless of the underlying merits of your position. Businesses that have the funds to pay, or a genuine dispute about the debt, have been wound up simply because the response deadline was missed.
Understanding exactly what you are dealing with — and what your options are — from the moment the demand arrives is not overcaution. It is basic commercial self-preservation.
What a statutory demand actually does
Under the Corporations Act 2001 (Cth), a creditor owed at least $4,000 (the current threshold for companies) can serve a statutory demand on a company requiring payment within 21 days. If the company neither pays the debt nor applies to a court to have the demand set aside within that period, it is deemed insolvent.
That deemed insolvency finding is the mechanism creditors rely on to bring winding-up applications. Once the presumption attaches, reversing it is genuinely difficult and expensive.
The 21 days runs from service — not when you open the envelope
This catches directors out repeatedly. The clock starts on the date of service, not when the demand was read, forwarded by reception, or finally landed on the right desk. If your registered office address is a tax agent or accountant, the demand may sit there for days before anyone flags it.
Check your company's registered address right now. Make sure someone reliable is monitoring that address for time-critical correspondence. A demand that sat unopened for a week has still burned a week of your response window.
Grounds to set a statutory demand aside
Applying to set aside a statutory demand must happen within the 21 days — courts have almost no discretion to extend that period. The main grounds under the Corporations Act are:
- A genuine dispute about the existence or amount of the debt. You do not need to prove you will win; you need to show the dispute is genuine, not merely asserted.
- An offsetting claim — a cross-claim or counterclaim against the creditor that equals or exceeds the demand amount.
- A defect in the demand that causes substantial injustice, such as a materially wrong amount or a description of the debt so vague it cannot be identified.
- Some other reason — a catch-all that courts have applied where strict enforcement would produce a clearly unjust outcome, though this ground is interpreted narrowly.
The threshold for establishing a genuine dispute is deliberately low: courts are not conducting a mini-trial on the underlying merits. But the evidence still needs to be put together quickly and presented properly. A bare denial is not enough.
The commercial decision sitting behind the legal one
Not every statutory demand should be fought in court. Sometimes the debt is real and the commercially intelligent response is to negotiate — pay a portion, agree a payment plan, or resolve a broader dispute of which this demand is only one piece. Rushing into a set-aside application when there is no genuine dispute, or when the legal cost exceeds the debt, is rarely the right answer.
Conversely, if the demand reflects a disputed amount, an inflated claim, or a creditor using the insolvency process as leverage rather than a genuine debt recovery tool, the application to set it aside is exactly what the legislation was designed for.
The decision tree — fight, negotiate, or pay — needs to be worked through in the first 24 to 48 hours. That is not an exaggeration.
Act within hours, not days
If a statutory demand has been served on your company, the time to take advice is today. The consequences of inaction are disproportionately severe relative to the underlying debt, and the options available to you narrow quickly.
BA Legal works with directors and business owners across the Gold Coast and South East Queensland on exactly these situations. If you have received a statutory demand, reach out to our team for an initial consultation before that clock runs any further.