Statutory demand served: what to do in the first 48 hours

The envelope starts a strict clock

A statutory demand is a creditor's formal, written request requiring a company to pay a debt within the statutory period, currently 21 days. The compliance period has been strictly applied by the courts and no extensions of time, or dispensation with these requirements, can be given. Your deadline is fixed from service, not from when you read the document or decide what to do about it.

If a company fails to comply with a statutory demand within the time provided, the company is presumed insolvent under the Corporations Act, and within three months the creditor may rely on the presumption as the basis for an application to wind up the company. Write today's date and calculate your day 21 deadline. Mark it everywhere you track commitments and add a reminder for day 14.

Check the debt against your records

Read the demand carefully. It must specify the debt, the amount owed and the creditor's details. Compare the figure claimed with your invoices, contracts and payment records. Does it match amounts you recognise? Are interest, costs or disputed charges included? If the creditor has added amounts not actually due, note those discrepancies immediately.

Gather every relevant document: contracts, purchase orders, invoices, bank statements, emails, text messages and delivery records. If you believe the debt is genuinely disputed or you hold a counterclaim that offsets the amount, those facts must be supported by evidence filed with the court within 21 days. A vague belief that the debt is wrong will not be enough.

Source: Official guidance

Your three options within 21 days

If a company is served with a statutory demand, it has 21 days after service to either comply with the demand or apply to the court under section 459G of the Corporations Act for an order that the demand be set aside. Complying means paying the full amount, securing it to the creditor's reasonable satisfaction, or reaching a binding settlement the creditor accepts in writing.

An application must be made within the statutory period after the demand is served and, within the same period, an affidavit supporting the application must be filed with the court and a copy of the application and affidavit must be served on the person who served the demand. Missing any step means the court will not hear your application.

When the court may set the demand aside

The court may set aside a statutory demand if there is a genuine dispute as to the debt, the company has an offsetting claim, there is a defect in the demand that will cause substantial injustice unless set aside, or for some other reason. An offsetting claim means a genuine claim the company has against the respondent by way of counterclaim, set-off or cross-demand.

A genuine dispute means a plausible contention requiring investigation, supported by evidence, not a bare assertion you disagree. The affidavit supporting your application must set out the facts, attach relevant documents and explain why the debt is disputed or offset. Obtain legal advice promptly if you intend to apply, because the application and affidavit must be prepared, filed and served within the same 21-day period.

Talk to the creditor and act today

Even if you dispute the debt, contact the creditor in writing within the first few days. Explain your position briefly, request supporting documents if the demand lacks detail, and indicate whether you intend to apply to set it aside or negotiate a resolution. A creditor may withdraw the demand or agree to a payment arrangement if you engage promptly and genuinely.

If the demand is valid and the company cannot pay, consider whether the business is insolvent and what director duties apply. Seek advice from a suitably qualified lawyer about the demand, your options to challenge or comply with it, and the consequences of non-compliance. If the situation involves insolvency, unpaid tax or multiple creditor pressures, contact CRP today about coordinating legal intervention and restructuring support with qualified professionals.