Received a Statutory Demand in NSW: Your 21-Day Response Options

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 NSW, 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 NSW 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 NSW, 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 NSW 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 NSW

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 equals or exceeds the demand amount, 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 NSW

An application to set aside a statutory demand in NSW 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 (NSW). 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 ClaimDone helps if you have received a statutory demand

If you have received a statutory demand in NSW, time is critical. ClaimDone’s Legal Response service helps you prepare a professionally structured response within the 21-day window.

Upload the statutory demand and your evidence. Our Proprietary AI Engine analyses the demand, identifies potential grounds to set aside, and generates a draft affidavit and Originating Process suitable for filing in the Supreme Court of NSW.

ClaimDone does not provide legal advice, but we give you a professionally formatted starting point prepared in hours, not weeks. For complex or high-value matters, we recommend instructing a solicitor to review and finalise your application before filing.

What you get:

• Draft Originating Process (Form 5) for the Supreme Court of NSW
• Draft affidavit setting out grounds to set aside
• Analysis of the demand for defects or grounds to challenge
• Delivered within 24 hours

Start your legal response now for $197 — flat fee, no subscription.

Final checklist: Received a statutory demand in NSW

• [ ] 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 NSW?

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 NSW?

You are not legally required to have a lawyer, but Supreme Court proceedings are complex. ClaimDone can prepare your draft application and affidavit, but for high-value or complex disputes, instructing a solicitor to finalise and appear is strongly recommended.