Missed the 21 days on a statutory demand? Here's what happens next.

Your company is now presumed insolvent

If a company fails to comply with a statutory demand within the time provided, the company is presumed insolvent under the Corporations Act. You had 21 days from the date the demand was served to either pay the full amount, secure it to the creditor's reasonable satisfaction, or apply to court to set the demand aside. That window closed, and the presumption now exists whether or not you agree with the debt.

Within three months of the date of non-compliance, the creditor who served the demand may rely on the presumption of insolvency as the basis for an application to the Court for orders winding up the company. The effect of the presumption is that the Court must presume, subject to evidence to the contrary, that the company is insolvent and should be wound up. The presumption is not proof that you are insolvent, but it shifts the burden to you to prove solvency if the creditor applies to wind up the company.

Contact the creditor immediately

Ring or email the creditor today. Explain that you missed the deadline and propose a specific resolution: full payment by a nominated date, a short-term payment arrangement, or a negotiated settlement amount. A creditor who wants payment more than it wants a winding-up application may accept a genuine proposal if you move quickly and keep your commitments.

Follow up every phone conversation in writing. Confirm what you offered, what the creditor said in response, and what you will do next. If the creditor agrees to a payment plan or settlement, get that agreement documented in writing before you pay anything. A written record protects both parties and removes ambiguity if the arrangement is later disputed.

Source: Official guidance

Prepare evidence that the company is solvent

If the creditor files a winding-up application, the court will presume the company is insolvent because of the failure to comply with the demand. You can rebut that presumption by presenting evidence that the company can in fact pay all its debts as and when they become due and payable. That means showing current assets, receivables, available facilities and realistic cash flow projections.

Gather bank statements, aged receivables reports, contracts for work in progress, loan facility letters and supplier payment terms. Update your cash flow forecast to show incomings and outgoings for the next three months. If assets are tied up in retentions or disputed variations, include supporting documents that explain when those amounts will be released. The evidence must be specific, current and verifiable.

Understand what a winding-up application means

A failure to respond to a statutory demand can have very serious consequences for a company. In particular, it may result in the company being placed in liquidation and control of the company passing to the liquidator of the company. Once a winding-up order is made, a liquidator is appointed to take control of the company's assets, investigate its affairs, and distribute any available funds to creditors according to the statutory priority.

Directors lose control the moment the order is made. The liquidator will examine transactions leading up to the winding up, including payments to directors, related parties and other creditors. If the liquidator finds the company traded while insolvent, directors may face personal liability for debts incurred during that period. Do not wait until the application is filed to assess your position.

Get advice this week and act today

If you cannot pay the debt or negotiate a binding settlement within the next few days, you need urgent legal and insolvency advice. A suitably qualified lawyer can assess whether there are grounds to oppose a winding-up application, explain your obligations as a director if the company is insolvent, and advise on alternatives such as voluntary administration or appointing a restructuring practitioner if the business is viable but over-leveraged.

Bring the statutory demand, proof of service, your cash position, debtor and creditor lists, and any correspondence with the creditor to that meeting. If the company owes money to multiple creditors, unpaid tax or superannuation, or has other unresolved disputes, raise all of those issues at once. CRP coordinates independent qualified professionals who can provide legal intervention, restructuring support and insolvency advice tailored to construction businesses under creditor pressure. Contact CRP today to arrange an urgent assessment and protect your position before the creditor files a winding-up application.