Important: If you have received a statutory demand, you have 21 days to respond. Missing this deadline can result in your company being presumed insolvent.
A statutory demand can arise when a company fails to pay the debt owed to a creditor. It is a formal legal mechanism used to recover debts from companies and can be an effective step before commencing winding up proceedings.
If money is owed to you by a company, it is important to obtain legal advice to determine the most appropriate recovery strategy. For the full debt recovery pathway, from letter of demand to enforcement, see our debt recovery lawyers page. A statutory demand can place significant pressure on the company to resolve the outstanding debt promptly. Before serving a statutory demand, creditors typically issue a letter of demand. For the full debt recovery process from first contact to enforcement, see our guide to recovering outstanding debts in NSW.
If your company has been served with a statutory demand, you should seek legal advice and not ignore the document. Failure to comply with the strict time limits can result in serious consequences, including a presumption of insolvency and winding up proceedings being commenced against the company.
A statutory demand is a formal written request that requires a company to pay a debt within 21 days from when the request is served. The demand must be accompanied by a supporting affidavit and comply with the requirements set out in section 459E of the Corporations Act 2001 (Cth).
If the company fails to comply with a statutory demand within the required timeframe, the company is presumed insolvent. Following the failure to comply, a creditor can make an application to the court pursuant to sections 459A and 459P of the Corporations Act 2001 (Cth) seeking orders to wind up the company.
The process generally involves:
Yes. A company can make an application to have the statutory demand set aside under section 459G of the Corporations Act 2001 (Cth).
Importantly, the application to have the statutory demand set aside must be filed within the 21 day period from when the demand was served.
The Court will determine whether the application to have the statutory demand set aside is ordered, having regard to:
An offsetting claim refers to a genuine dispute between the company and the creditor regarding the existence of the debt in question. The offsetting claim is by way of a counter-claim, set off or cross-demand against the creditor.
The Courts have held that a genuine dispute requires the grounds of the claim to be “real and not spurious, hypothetical, illusory or misconceived.”1
If a valid offsetting claim exists, the Court may set aside the statutory demand. Where the underlying dispute concerns a breach of contract, see our contract and commercial disputes lawyers page.
If a company ignores the statutory demand or fails to properly respond within the prescribed 21 day period:
Given the seriousness of these consequences, we recommend that you contact us upon receiving a statutory demand to obtain legal advice on your next steps.
Citilawyers are knowledgeable on the topic and are able to provide practical legal solutions to recover the debt that is owed to you.
If you are a creditor and currently experiencing a debt recovery issue in relation to money owed to you by a company or if you are a company that has been served with a Statutory Demand, reach out to speak with our team.
Our statutory demand lawyers act for creditors and company directors throughout Sydney and across New South Wales, including Parramatta, Chatswood, North Sydney, Liverpool, Penrith, Ryde, Bondi Junction, Inner West, Sutherland Shire, Hornsby, Burwood, Bankstown, Manly, and Newtown, as well as clients in regional NSW.
Given the strict 21-day deadlines involved, most statutory demand matters are managed remotely by phone, email, and electronic document exchange, so clients across NSW can act quickly without needing to attend our Sydney CBD office.
If you are a creditor needing to issue a statutory demand, or a company that has been served with one, contact Citilawyers today. The 21-day deadline runs from the date of service; early advice protects your position.