You have opened the mail to find Form 509H — a statutory demand issued under the Corporations Act 2001. The clock is now ticking. You have exactly 21 days from service to respond, or your company will be presumed insolvent and vulnerable to wind-up proceedings.
This guide explains what to do if you have received a statutory demand in New South Wales, your legal options within the 21-day window, and how to protect your company from liquidation.
What is a statutory demand?
A statutory demand is a formal notice requiring a company to pay a debt of at least $4,000 within 21 days. It is served using Form 509H, accompanied by an affidavit verifying the debt.
If your company does not comply within 21 days — either by paying the debt in full or applying to set aside the demand — the Corporations Act deems your company insolvent. The creditor can then apply to wind up your company without proving inability to pay debts.
The statutory demand process is governed by Part 5.4 of the Corporations Act 2001 (Cth), which applies uniformly across all Australian states. Applications to set aside a statutory demand in New South Wales are filed in the Supreme Court of New South Wales.
The 21-day deadline is absolute
You have 21 days from the date the demand was served on your company. Not 21 business days. Not 21 days from when you personally saw it. 21 calendar days from service.
Service typically occurs by leaving the demand at your company’s registered office or by posting it to the registered address. If served by post, service is usually deemed to occur on the second business day after posting.
There are no extensions. The Supreme Court has no power to extend the 21-day period, even in exceptional circumstances. If you miss the deadline, the demand stands, and your company is presumed insolvent.
Your three options within 21 days
When you receive a statutory demand in New South Wales, you have three realistic options:
1. Pay the debt in full
If the debt is legitimate and your company has the funds, paying in full within 21 days is the simplest option. Once paid, the demand lapses. Obtain a receipt and written confirmation from the creditor that the debt is satisfied.
2. Apply to set aside the demand in the Supreme Court
If you have grounds to challenge the demand, you must file an application and supporting affidavit in the Supreme Court of New South Wales within 21 days.
3. Negotiate a settlement or payment plan
If the creditor is willing, you can negotiate a settlement, payment plan, or withdrawal of the demand. Any agreement must be documented in writing and signed before the 21-day deadline expires. The creditor must confirm in writing that the demand is withdrawn.
Ignoring the demand is not an option.
Grounds to set aside a statutory demand in New South Wales
The Corporations Act sets out the grounds on which the Supreme Court may set aside a statutory demand. The most common grounds are:
Genuine dispute
You must demonstrate a genuine dispute about the existence or amount of the debt. A genuine dispute means a plausible contention requiring investigation, not a mere assertion. You must provide evidence — invoices, contracts, correspondence, expert reports — showing that the debt is disputed on substantial grounds.
The test is not whether you will ultimately win the dispute, but whether there is a dispute worthy of determination in separate proceedings.
Offsetting claim
If your company has a genuine claim against the creditor that brings the undisputed debt below $4,000 (it can come from a different transaction), you can apply to set aside the demand on the basis of an offsetting claim. The claim must be quantified, genuine, and able to be set off against the debt.
For example, if the creditor owes your company $10,000 for defective goods, and the demand is for $6,000, the offsetting claim may exceed the demand.
Defect in the demand
A statutory demand must strictly comply with the Corporations Act and Corporations Regulations. Defects include:
- Incorrect company name or ACN
- Failure to attach the required affidavit
- Demand for an amount less than $4,000
- Demand for unliquidated or disputed amounts
- Failure to specify the debt with sufficient particularity
However, the Court may dismiss the application if the defect is minor and causes no substantial injustice. Material defects that prejudice the company’s ability to respond are more likely to succeed.
Other reason
The Corporations Act allows the Court to set aside a demand if there is “some other reason” why the demand should be set aside. This is a broad discretion and has been applied where the demand is an abuse of process, issued for an improper purpose, or where there are exceptional circumstances.
How to apply to set aside a statutory demand in New South Wales
An application to set aside a statutory demand in New South Wales must be filed in the Supreme Court of New South Wales within 21 days of service. The process is:
Step 1: Prepare the originating process
File an Originating Process using Form 5 under the Supreme Court (Corporations) Rules 1999 (New South Wales). The application must be titled “Application to Set Aside Statutory Demand” and name your company as plaintiff and the creditor as defendant.
Step 2: Prepare the supporting affidavit
You must file an affidavit in support, sworn by a director or officer of the company, setting out:
- The grounds for setting aside the demand
- The facts supporting a genuine dispute or offsetting claim
- All relevant evidence — contracts, invoices, emails, expert reports
- Why the demand should not stand
The affidavit must be filed and served within the 21-day period.
Step 3: File and serve within 21 days
Both the Originating Process and the supporting affidavit must be filed with the Supreme Court and served on the creditor within 21 days of service of the demand. Late filing is fatal.
Step 4: Attend the hearing
The Court will list the matter for hearing. Both parties may file further affidavits. The Court will determine whether the demand should be set aside or whether the company must pay or face wind-up proceedings.
Costs and risks of applying to set aside
Applying to set aside a statutory demand is not without risk. If your application fails, you will likely be ordered to pay the creditor’s legal costs, which can be substantial.
The Supreme Court expects applicants to act in good faith. If the Court finds that the application was brought to delay payment of a legitimate debt, costs may be awarded on an indemnity basis.
Before applying, assess the strength of your grounds carefully. If the debt is genuine and you have no genuine dispute or offsetting claim, applying to set aside may increase your total liability.
What happens if you do nothing?
If you do not respond within 21 days, the statutory demand stands. Your company is presumed to be insolvent. The creditor can then file a wind-up application in the Supreme Court.
In wind-up proceedings, the Court presumes insolvency. The onus shifts to your company to prove solvency. This is difficult and expensive. If the Court orders wind-up, a liquidator is appointed, and your company is placed into liquidation.
Directors may face personal liability for insolvent trading if the company continues to incur debts while insolvent.
How Claim Done helps if you have received a statutory demand
Claim Done does not prepare applications to set aside a statutory demand. The application and a supporting affidavit must be filed with the Supreme Court or the Federal Court, and served on the creditor, within 21 days of service of the demand (Corporations Act 2001, s 459G). That time cannot be extended, so get legal advice straight away.
Final checklist: Received a statutory demand in New South Wales
- [ ] Confirm the date of service — calculate the 21-day deadline
- [ ] Assess whether the debt is genuine or disputed
- [ ] Gather all evidence — contracts, invoices, correspondence
- [ ] Decide: pay, apply to set aside, or negotiate
- [ ] If applying to set aside, file and serve within 21 days
- [ ] If negotiating, obtain written withdrawal before the deadline
- [ ] If paying, obtain written confirmation of satisfaction
- [ ] Do not ignore the demand
The 21-day window is absolute. Act immediately.
Frequently Asked Questions
Can I get an extension of the 21-day deadline to respond to a statutory demand in New South Wales?
No. The Supreme Court has no power to extend the 21-day period under the Corporations Act. The deadline is absolute. If you miss it, the demand stands and your company is presumed insolvent.
What happens if I apply to set aside the statutory demand but my application is rejected?
If the Supreme Court dismisses your application, the statutory demand remains in force. You will likely be ordered to pay the creditor’s legal costs. The creditor can then apply to wind up your company based on the presumption of insolvency.
Can I negotiate with the creditor after receiving a statutory demand?
Yes. You can negotiate a settlement, payment plan, or withdrawal of the demand. Any agreement must be documented in writing and signed before the 21-day deadline. The creditor must confirm in writing that the demand is withdrawn.
What is a genuine dispute for the purposes of setting aside a statutory demand?
A genuine dispute means a plausible contention requiring investigation, supported by evidence. It is not enough to simply assert that the debt is disputed — you must provide contracts, invoices, correspondence, or expert reports showing the dispute has substance.
Do I need a lawyer to apply to set aside a statutory demand in New South Wales?
You are not legally required to have a lawyer, but Supreme Court proceedings are complex. Get legal advice early: the 21 days cannot be extended.
What the 21 days mean
Same problem. What a prepared case looks like.