Final Demand vs Statutory Demand: Key Legal Differences

You sent a letter of demand. Nothing happened. Now someone mentions a “statutory demand” and someone else says you need a “final demand.” They sound similar. They are not.

One is a last-chance warning. The other is a loaded weapon with a 21-day fuse that can wind up a company. This guide explains the legal weight, timeframes, and practical consequences of each.

What is a final demand?

A final demand is a follow-up letter sent after your initial letter of demand was ignored. It restates the debt, references the original demand, and sets a final deadline — typically 7 to 14 days — before you escalate to court or tribunal.

Key characteristics:

• No prescribed form or format
• Can be used against individuals or companies
• No minimum debt threshold
• Not governed by any specific statute
• Delivered by post, email, or registered mail
• Does not trigger any automatic legal consequence

A final demand is persuasive, not coercive. It signals intent and creates a paper trail. But it does not force the debtor to act. If they ignore it, you file in the relevant tribunal or court.

What is a statutory demand?

A statutory demand is a formal notice issued under the Corporations Act. It can only be served on a registered company (Pty Ltd or Ltd). It demands payment of a debt of $4,000 or more within 21 days, and warns that failure to comply is grounds for a presumption of insolvency — which can lead to wind-up proceedings.

Key characteristics:

• Must use the prescribed form under the Corporations Regulations
• Must be accompanied by a supporting affidavit sworn before a JP or solicitor
• Can only be served on a company (not individuals, sole traders, or partnerships)
• Minimum debt: $4,000
• 21-day compliance period (strict)
• If ignored, the company is presumed insolvent

A statutory demand is not a request. If the company does not pay, apply to set aside, or enter into a genuine payment arrangement within 21 days, you can file a winding-up application in the Federal Court or Supreme Court.

Final demand vs statutory demand: side-by-side comparison

| Feature | Final Demand | Statutory Demand | |———|————–|——————| | Legal basis | Common practice, no statute | Corporations Act | | Who can receive it | Anyone (individual, company, partnership) | Companies only (Pty Ltd / Ltd) | | Minimum debt | None | $4,000 | | Prescribed form | No | Yes — prescribed form + affidavit | | Timeframe | Flexible (7-14 days typical) | 21 days (strict) | | Consequence if ignored | You file in tribunal/court | Presumption of insolvency; wind-up | | Cost to prepare | Low | Moderate (affidavit, service costs) | | Enforceability | None — it is a warning | Grounds for wind-up application |

When to use a final demand

Use a final demand when:

• The debtor is an individual (not a company)
• The debt is under $4,000
• You want to give one last chance before filing in a tribunal
• The debtor has partially engaged but stopped responding
• You want to create a clear paper trail showing you gave reasonable notice

A final demand signals intent: “This is your last chance before I take formal action.” It does not carry statutory weight, but it is commercially effective in many cases — particularly where the debtor is disorganised, forgetful, or cash-strapped but not malicious.

Practical tip: Send it via registered post or email with read receipt. Keep proof of delivery. If you end up in tribunal, the magistrate or member will want to see that you gave fair warning.

When to use a statutory demand

Use a statutory demand when:

• The debtor is a registered company (check ASIC register)
• The debt is $4,000 or more
• The debt is liquidated (a specific, ascertainable amount — not estimated damages)
• The debt is not genuinely disputed
• You are prepared to follow through with wind-up proceedings if they do not pay

A statutory demand is the most powerful debt recovery tool against a company. It shifts the burden. The company must either pay, apply to set aside the demand (which requires filing in the Supreme Court and showing a genuine dispute or offsetting claim), or risk being presumed insolvent.

Warning: Do not issue a statutory demand if:

• The debt is genuinely disputed
• You are not prepared to follow through with wind-up proceedings
• The company is already insolvent and has no assets
• You issued it to pressure payment on a disputed claim (this can be an abuse of process and may result in costs orders against you)

What happens after you serve a statutory demand?

Once served, the company has 21 days to:

1. Pay the debt in full — the demand is satisfied
2. Apply to set aside the demand — the company files an application in the Supreme Court (or Federal Court), arguing there is a genuine dispute, an offsetting claim, or a defect in the demand
3. Do nothing — after 21 days, the company is presumed insolvent and you can file a winding-up application

If the company applies to set aside, you will need to defend the application. If they succeed, the demand is set aside and you are back to square one (and may be ordered to pay their legal costs). If they fail, the demand stands and you can proceed to wind-up.

Timeframe for wind-up: You must typically file the winding-up application within 6 months of the end of the 21-day compliance period. If you miss this window, the presumption of insolvency lapses and you cannot rely on the demand.

What happens after you send a final demand?

Nothing automatic. The ball is still in your court. If the debtor ignores the final demand, you file your claim in the relevant tribunal or court:

• Under $10,000 (NSW): NSW Civil and Administrative Tribunal (NCAT)
• Under $10,000 (VIC): Victorian Civil and Administrative Tribunal (VCAT)
• Under $25,000 (QLD): Queensland Civil and Administrative Tribunal (QCAT)
• Under $10,000 (SA): South Australian Civil and Administrative Tribunal (SACAT)
• Under $10,000 (WA): Magistrates Court of Western Australia (small claims)
• Under $25,000 (TAS): Tasmanian Civil and Administrative Tribunal (TasCAT)
• Under $25,000 (ACT): ACT Civil and Administrative Tribunal (ACAT)
• Under $25,000 (NT): Northern Territory Civil and Administrative Tribunal (NTCAT)

You will need to prepare an application, attach your evidence (including the original letter of demand and final demand), pay the filing fee, and serve the respondent. The tribunal will schedule a hearing. If you win, you get a tribunal order. If the debtor still does not pay, you can enforce the order through a sheriff, garnishee, or insolvency notice.

Can you send both?

Yes — but only in sequence, and only if the debtor is a company owing $4,000+.

Typical escalation path:

1. Letter of demand — first formal request, 14-21 days to pay
2. Final demand — second formal request, 7-14 days to pay
3. Statutory demand — formal wind-up threat under Corporations Act, 21 days to pay or apply to set aside

Sending both a final demand and a statutory demand at the same time is redundant. The statutory demand is the stronger tool. If you are eligible to use it, use it. If not, stick with the final demand and prepare for tribunal.

Common mistakes to avoid

Issuing a statutory demand against an individual: It will be invalid. Statutory demands apply only to companies.

Issuing a statutory demand for a disputed debt: If the debt is genuinely disputed, the company can apply to set aside the demand and you may be ordered to pay their costs for abusing the process.

Threatening wind-up without intent to follow through: Issuing a statutory demand is not a bluff. If you are not prepared to file a winding-up application, do not issue the demand.

Using the wrong form: The prescribed form is mandatory. Do not use a template from the internet or a generic “statutory demand” letter. It must comply with the Corporations Regulations or it can be set aside on technical grounds.

Missing the 6-month window: If you do not file a winding-up application within the typical 6-month window after the end of the 21-day compliance period, the presumption of insolvency may lapse and you cannot rely on the demand.

How ClaimDone helps

ClaimDone prepares both final demands and statutory demands, depending on your situation.

Final demand: Upload your evidence and complete a 5-minute intake form. Our Proprietary AI Engine drafts a professionally formatted final demand and delivers it automatically to the other party. $79 flat fee, done in 60 minutes.

Statutory demand: Upload your evidence and complete the intake form. Our Proprietary AI Engine prepares the prescribed form and the supporting affidavit template, ready for you to swear before a JP or solicitor and serve on the company. $197 flat fee, prepared in 60 minutes.

Both services are available Australia-wide. No subscription. No hidden fees. ClaimDone does not provide legal advice — we generate legal-style documents based on the evidence you provide.

Which tool should you use?

A final demand is a warning shot. A statutory demand is a loaded weapon. Use the final demand when you are dealing with an individual, a small debt, or a debtor who might still pay if pushed. Use the statutory demand when you are dealing with a company owing $4,000 or more, and you are prepared to follow through with wind-up proceedings if they do not comply.

Do not confuse the two. Do not use the wrong tool for the job. And do not issue a statutory demand unless you are serious about enforcing it. If you need a final demand prepared and sent today, prepare your final demand in 60 minutes with ClaimDone.

Frequently Asked Questions

Can I send a statutory demand to a sole trader?

No. Statutory demands can only be served on registered companies (Pty Ltd or Ltd). Sole traders are individuals, not companies. If you are owed money by a sole trader, use a final demand followed by a tribunal application.

What happens if the company ignores my statutory demand?

After 21 days, the company is presumed insolvent under the Corporations Act. You can then file a winding-up application in the Federal Court or Supreme Court. The company will be given a chance to show cause why it should not be wound up.

Can a company apply to set aside a statutory demand?

Yes. The company has 21 days to apply to the Supreme Court (or Federal Court), arguing there is a genuine dispute about the debt, an offsetting claim, or a defect in the demand. If they succeed, the demand is set aside.

Do I need a lawyer to issue a statutory demand?

No. You can prepare and serve a statutory demand yourself. However, you must use the correct prescribed form and attach a supporting affidavit sworn before a JP or solicitor. ClaimDone prepares both documents for $197, ready for you to swear and serve.

How long does the debtor have to respond to a final demand?

There is no statutory timeframe. Most final demands give 7 to 14 days. The timeframe should be reasonable — long enough to allow the debtor to respond, but short enough to show you are serious about escalating if they do not pay.