Statutory demand: what to do in the 21 days

A creditor’s statutory demand is a formal written demand for a debt of at least $4,000 that is due and payable. Your company has 21 days from the day it is served to pay it, reach an agreement, or apply to the court to set it aside. If none of those happens, the company is presumed insolvent, and for the next three months the creditor can apply to have it wound up. The 21 days is the whole ball game: it cannot be extended, and it is not negotiable.

What is a statutory demand?

A statutory demand is a document a creditor serves on a company under section 459E of the Corporations Act 2001. It can cover a single debt, or several debts added together, as long as they are due and payable and total at least $4,000, which is the statutory minimum.

To be valid, the demand must be in writing, specify the debt and the amount, comply with the prescribed form, require payment within the statutory period, and be signed by or for the creditor. Unless the debt is a judgment debt, it must also be accompanied by an affidavit verifying that the debt is due and payable.

It is not a court order, and it does not mean the company is insolvent. It is a creditor using a shortcut: if the company does not respond, the creditor no longer has to prove insolvency to wind it up.

The 21 days

The clock runs from the day the demand is served, not the date printed on it. Within those 21 days the company must do one of three things:

Pay the debt in full.
Reach an agreement with the creditor that satisfies the demand. Get it in writing before the 21 days expire, not after.
Apply to the court to set the demand aside. The application must be filed and served on the creditor within the 21 days.

The court has no power to extend that period. An application filed on day 22 is too late, however good the underlying argument. This is the single most expensive mistake directors make with statutory demands.

Setting a demand aside

A court may set a demand aside where there is a genuine dispute about whether the debt exists or how much it is, or where the company has an offsetting claim against the creditor by way of counterclaim, set-off or cross demand, even one arising from an unrelated matter.

The court works out a substantiated amount: the admitted amount of the debt, less the offsetting total. If that comes to less than $4,000, the demand is set aside. If it comes to more, the court may vary the demand instead.

A demand can also be set aside because of a defect in it that would cause substantial injustice, or for some other reason. Not every error is fatal, so a defective-looking demand is still not something to sit on.

What happens if you ignore it

Presumption of insolvency. Failing to comply within 21 days means the company is presumed insolvent.
A three-month window. The creditor can rely on that presumption to apply to wind the company up, within three months of the failure to comply.
The burden shifts. At the hearing the court must presume the company is insolvent unless the company proves otherwise, which means solvency evidence, not assertions.
The company cannot re-argue the debt. Having missed the 21 days, the company generally cannot raise the dispute it should have raised then.

Statutory demand or winding-up application: which are you looking at?

	Statutory demand	Winding-up application
What it is	A written demand from a creditor. No court involvement yet.	Court proceedings seeking an order that the company be wound up and a liquidator appointed.
Where it comes from	The creditor or its solicitors, served on the registered office.	Filed in the Federal Court or a Supreme Court, with a hearing date.
Your deadline	21 days from service.	The hearing date, though anything useful has to be done well before it.
What ends it	Payment, an agreement, or a successful set-aside application.	Payment or settlement before the hearing, an adjournment, or the court dismissing the application. Otherwise the company is wound up.
Can you still restructure	Yes. Small business restructuring and voluntary administration are both available.	Sometimes. An administrator can still be appointed, but the timetable is tight and the court’s view matters.

Statutory demands and directors

A statutory demand is served on the company, so it is the company’s debt, not the director’s. However, the two are usually connected: if a director has given a personal guarantee, the same creditor can pursue them personally, and unpaid tax can also produce a director penalty notice, which is a separate 21-day deadline with separate consequences. A demand for a personal debt takes a different form again, a bankruptcy notice.

If the company is wound up, the director’s own exposure does not disappear with it. See liquidation vs bankruptcy.

What to do this week

Find the service date. Everything is counted from it. Check the registered office, since demands are often served there and not seen for days.
Decide whether the debt is genuinely disputed. If it is, a set-aside application has to be prepared immediately.
Test whether the company can pay. If it cannot, the question is no longer the demand, it is which formal option fits, and the answer is easier to act on before a winding-up application is filed.
Get advice in the first week, not the third. Options narrow sharply after day 21.

How Greengate Advisory can help

If your company has received a statutory demand, contact us as soon as it arrives. Our registered liquidators can assess whether the company can pay, what a realistic arrangement with the creditor looks like, and whether restructuring or voluntary administration is the better course, and we work alongside your lawyer where a set-aside application is on the table. The first consultation is free and confidential, and we can explain the options in English, Mandarin, Cantonese or Korean. Call (02) 8318 3699 in Sydney or (07) 3868 1888 in Brisbane.

Common questions

How long do I have to respond to a statutory demand?

21 days from the day the demand is served on the company. The period runs from service, not from the date on the document.

What is the minimum amount for a statutory demand?

$4,000. The debt, or the total of several debts, must be due and payable and reach that statutory minimum.

Can the 21 days be extended?

No. The court has no power to extend the period for complying with a statutory demand or for applying to set it aside, so an application filed after the 21 days is too late.

What happens if I ignore a statutory demand?

The company is presumed insolvent, and the creditor can apply to the court to wind it up within three months of the failure to comply. At the hearing the court must presume insolvency unless the company proves otherwise.

On what grounds can a statutory demand be set aside?

Where there is a genuine dispute about the debt, where the company has an offsetting claim, where a defect in the demand would cause substantial injustice, or for some other reason. The application must be filed and served within 21 days.

Does a statutory demand mean my company is insolvent?

No. It is a demand for payment. Insolvency is only presumed if the company fails to comply with it within the 21 days.

Can I still restructure after a statutory demand?

Yes. Small business restructuring and voluntary administration are both still available, and acting before a winding-up application is filed gives you more room.

Is a statutory demand the same as a bankruptcy notice?

No. A statutory demand is served on a company. A bankruptcy notice is the equivalent for an individual and has its own rules and threshold.

Authored by Patrick Loi, Managing Principal and Registered Liquidator. Patrick has over 20 years of business restructuring and insolvency experience and founded Greengate Advisory. Meet our team.

This page is general information, not advice about your situation. Sources: Federal Court of Australia, Corporations Information Sheet 1: Winding up proceedings based on an unsatisfied statutory demand; Corporations Act 2001 sections 459E, 459H and 459J; ASIC Liquidation: a guide for creditors. Checked 29 September 2026.