Final Demand vs Statutory Demand: Which One to Use

You are owed money. You have sent reminders. The debtor is ignoring you. Now you need to escalate — but which tool do you use?

A final demand and a statutory demand are not the same thing. They serve different purposes, apply to different debtors, and trigger entirely different consequences. Use the wrong one and you waste time, money, and credibility.

What is a final demand?

A final demand is the last letter you send before starting legal proceedings. It is a commercial warning that you are about to take the next step.

You can send a final demand to:

• An individual
• A sole trader
• A partnership
• A company

The letter typically gives the debtor 7 to 14 days to pay the outstanding amount. If they do not pay, you proceed to the relevant tribunal or court.

A final demand does not trigger any statutory consequences. It is your last attempt to recover the debt without filing a claim.

When to use a final demand

Use a final demand when:

• You have already sent at least one letter of demand or invoice reminder
• The debtor has not responded or has made excuses but not paid
• You are prepared to file a tribunal application or court claim if they do not pay
• The debt is undisputed and you have clear evidence

A final demand works for debts of any size — from $500 to $50,000. It applies across all Australian states and territories.

What happens after you send a final demand

If the debtor pays within the deadline, the matter is resolved.

If they do not pay, you file your claim in the appropriate tribunal or court. The final demand becomes part of your evidence, showing you gave the debtor a reasonable opportunity to pay before commencing proceedings.

What is a statutory demand?

A statutory demand is a formal legal document served under the Corporations Act 2001 (Cth). It is used exclusively against registered companies — not individuals, sole traders, or partnerships.

The statutory demand gives the company 21 days to either:

• Pay the debt in full, or
• Apply to the court to set aside the demand

If the company does neither, it is presumed to be insolvent. You can then apply to wind up the company.

When to use a statutory demand

Use a statutory demand when:

• The debtor is a registered company (Pty Ltd or Ltd)
• The debt is $4,000 or more (the statutory minimum)
• The debt is liquidated (a specific, ascertainable amount)
• The debt is undisputed
• You are prepared to follow through with wind-up proceedings if the company does not pay

A statutory demand is the most powerful debt recovery tool against a company. It does not require a court judgment. It puts immediate pressure on the directors because insolvency has serious consequences — including potential personal liability.

What happens after you serve a statutory demand

The company has three options:

1. Pay the debt in full within 21 days
2. Apply to set aside the demand (must be filed within 21 days and must show a genuine dispute or other defect)
3. Do nothing — in which case the company is presumed insolvent and you can apply to wind it up

If the company applies to set aside the demand, the matter goes to court. The company must prove there is a genuine dispute about the debt or a defect in the demand itself.

If the company does nothing, you can file a winding-up application. This does not guarantee the company will be liquidated, but it is a serious escalation that often forces payment.

Key differences between final demand and statutory demand

| Final Demand | Statutory Demand | |——————|———————-| | Can be sent to any debtor (individual, company, sole trader) | Can only be sent to a registered company | | No minimum debt amount | Minimum $4,000 debt | | No statutory consequences | Triggers presumption of insolvency after 21 days | | Pre-legal warning letter | Formal legal document under Corporations Act | | Flexible deadline (usually 7-14 days) | Fixed 21-day deadline | | Next step: tribunal or court claim | Next step: winding-up application | | Does not require an affidavit | Must be accompanied by a supporting affidavit |

Which one should you use?

Use a final demand if:

• The debtor is an individual or sole trader
• The debt is under $4,000
• You want a flexible, low-cost escalation before going to tribunal
• You are not yet ready to trigger insolvency proceedings
• The debtor is a company but you prefer to file a tribunal claim rather than pursue wind-up

Use a statutory demand if:

• The debtor is a registered company
• The debt is $4,000 or more
• The debt is undisputed and liquidated
• You want maximum leverage and are prepared to apply for wind-up if they do not pay
• You want to use the Corporations Act pathway instead of the tribunal process

Can you send both?

Technically yes, but it is rarely necessary.

If you have already sent a letter of demand and a final demand to a company, and they still have not paid, you can escalate directly to a statutory demand (assuming the debt meets the $4,000 threshold).

You would not send a statutory demand and then follow it with a final demand — the statutory demand is already the most serious pre-wind-up step.

Some creditors send a final demand first, wait for the deadline to pass, and then serve a statutory demand. This can be useful if you want to give the company one last chance before triggering the insolvency process.

Common mistakes to avoid

Sending a statutory demand to an individual

A statutory demand only applies to companies. If you serve one on an individual, it has no legal effect. Use a final demand instead, then file a tribunal or court claim.

Using a statutory demand for a disputed debt

If the company has a genuine dispute about whether the debt is owed, the court will typically set aside the statutory demand. Do not use this tool if there is any real question about liability.

Not following the formal requirements

A statutory demand must be in the prescribed form (Form 509H) and must be accompanied by an affidavit verifying the debt. If you get the formalities wrong, the company can apply to set it aside on technical grounds.

Threatening wind-up without intending to follow through

If you serve a statutory demand, you must be prepared to apply for wind-up if the company does not pay. Bluffing damages your credibility.

How ClaimDone helps

ClaimDone prepares both final demands and statutory demands using our Proprietary AI Engine.

For a final demand, we generate a professionally formatted letter citing the applicable law and your prior attempts to recover the debt. We send it automatically to the debtor, giving them one last chance to pay before you file your claim.

For a statutory demand, we prepare Form 509H and the supporting affidavit template for you to swear before a JP or solicitor. We ensure the debt meets the $4,000 threshold, the company is correctly identified, and the formalities are met.

Both services are flat-fee, Australia-wide, and delivered within 60 minutes of completing the intake form.

When to get legal advice

Use a lawyer if:

• The debt is over $100,000
• The company is likely to dispute the demand and you need representation in court
• You are ready to apply for wind-up and need a solicitor to file the application
• The debtor has already filed for bankruptcy or entered voluntary administration
• The matter involves complex contractual disputes or cross-claims

ClaimDone does not provide legal advice. We generate legal-style documents based on the evidence you upload. For complex or high-value matters, consult a qualified Australian lawyer.

Ready to escalate your debt recovery?

A final demand is a pre-legal warning. A statutory demand is a formal insolvency tool. Use the right one for the right debtor.

If the debtor is an individual or the debt is under $4,000, prepare your final demand using ClaimDone. If the debtor is a company and the debt is $4,000 or more, ClaimDone's statutory demand service gives you maximum leverage. Both are delivered fast, at a fixed fee, with no ongoing costs.

Frequently Asked Questions

Can I send a statutory demand to a sole trader?

No. A statutory demand can only be served on a registered company under the Corporations Act. If the debtor is a sole trader, use a final demand and then file a tribunal or court claim if they do not pay.

What happens if the company ignores my statutory demand?

If the company does not pay or apply to set aside the demand within 21 days, it is presumed insolvent under the Corporations Act. You can then apply to the court to wind up the company.

How long should I give in a final demand?

Typically 7 to 14 days. The deadline should be reasonable given the circumstances. If the debtor has already ignored multiple reminders, 7 days is appropriate. If this is the first formal escalation, 14 days is more common.

Can a company dispute a statutory demand?

Yes. The company can apply to the court to set aside the demand if there is a genuine dispute about the debt or a defect in the demand itself. The application must be filed within 21 days of service.

Do I need a lawyer to serve a statutory demand?

Not necessarily. You can prepare and serve a statutory demand yourself, but it must comply with the formal requirements under the Corporations Act. ClaimDone prepares Form 509H and the supporting affidavit template for you. If the company disputes the demand, you may need a lawyer for the court hearing.