Responding to a Statutory Demand in Victoria: Your 21-Day Window

A statutory demand is the most serious debt collection tool a creditor can use against a registered company in Victoria. Served under the Corporations Act, it gives your company exactly 21 days to pay the debt in full, reach an agreement, or apply to the Supreme Court of Victoria to have it set aside.

Miss that deadline and your company is presumed insolvent. The creditor can file a wind-up application, directors face personal liability risks, and your ability to trade is immediately compromised.

What is a statutory demand?

A statutory demand is a formal notice requiring your company to pay a debt of at least $4,000 within 21 days. It is not a court order — it is a statutory notice that triggers a legal presumption of insolvency if ignored.

The demand must be accompanied by an affidavit verifying the debt and served at your company’s registered office address as recorded with ASIC. Once served, the 21-day clock starts immediately.

Why it matters:

• After 21 days, your company is presumed insolvent
• The creditor can file a wind-up application in the Supreme Court of Victoria
• Directors may face insolvent trading claims
• Your company’s credit rating and banking relationships are compromised
• You lose the right to dispute the debt in wind-up proceedings

The 21-day deadline is absolute

The Corporations Act gives you 21 days from the date of service to either pay the debt or apply to the Supreme Court of Victoria to set the demand aside. There are no extensions. The court has no discretion to extend this period.

Day 1 is the day after the demand is served. If served on a Monday, day 1 is Tuesday. Day 21 is the final day to file your application and supporting affidavit with the court.

If day 21 falls on a weekend or public holiday in Victoria, the deadline extends to the next business day.

What “served” means:

• Delivered to your registered office address by hand or post
• Left at the registered office during business hours
• Sent by registered post to the registered office (typically deemed served 3 business days after posting)

Check your ASIC records immediately. If the demand was sent to an old address, you may have grounds to challenge service.

Grounds to set aside a statutory demand in Victoria

You cannot set aside a statutory demand simply because you cannot afford to pay. The Supreme Court of Victoria will only set aside a demand if you establish one of the recognised grounds.

1. Genuine dispute about the debt

The most common ground. You must show there is a genuine dispute about the existence or amount of the debt. A genuine dispute means a plausible contention requiring investigation — not just a bare assertion.

Examples:

• The invoice was never issued or received
• The goods or services were defective and you are entitled to a set-off
• The debt has already been paid
• The amount claimed is incorrect or inflated
• The contract was terminated or varied before the debt arose

You do not need to prove the dispute on the balance of probabilities. You only need to show there is a real question to be tried.

2. 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. The offsetting claim must be quantified and supported by evidence.

Example: The creditor owes you $10,000 for unpaid invoices, and they are claiming $6,000 in the statutory demand. You have an offsetting claim that exceeds the demand.

3. Defect in the demand

A defect means an error in the form or content of the demand that causes substantial injustice. Minor errors are not enough.

Examples of defects:

• The demand does not specify the debt with sufficient particularity
• The creditor’s details are incorrect or misleading
• The demand was not accompanied by a proper affidavit
• The debt claimed includes an amount that is not a liquidated sum

The court will only set aside a demand for a defect if it would cause substantial injustice and cannot be cured by an order of the court.

4. Other reason

The court has discretion to set aside a demand if there is “some other reason” why it should be set aside. This is rarely used.

Examples:

• The creditor served the demand for an improper purpose (to pressure settlement of an unrelated dispute)
• The creditor has already agreed to a payment plan but served the demand anyway
• The debt is genuinely disputed and the creditor has alternative remedies available

How to apply to set aside a statutory demand in Victoria

You must file an application and supporting affidavit in the Supreme Court of Victoria within 21 days.

Step 1: Prepare your affidavit

Your affidavit must set out the facts supporting your application. It must be sworn before a lawyer, justice of the peace, or other authorised person. The affidavit should:

• Identify the statutory demand and the date it was served
• Set out the grounds for setting aside the demand
• Attach all supporting documents (invoices, contracts, emails, payment records)
• Be clear, specific, and factual — avoid legal argument

Step 2: File the application and affidavit

File the originating process and affidavit at the Supreme Court of Victoria registry. You must also file an affidavit of service proving the demand was served on your company.

Filing fees:

• Application to set aside statutory demand: $1,175
• Additional fees may apply for urgent hearing dates

Step 3: Serve the application on the creditor

You must serve a sealed copy of the application and affidavit on the creditor within the 21-day period. Service is typically by email or post to the creditor’s address as shown on the demand.

Step 4: Attend the hearing

The court will list the matter for a hearing. Both parties can file further affidavits and written submissions. The court will decide whether to set aside the demand, vary it, or dismiss the application.

If the court dismisses your application, you will likely be ordered to pay the creditor’s legal costs.

What if you cannot dispute the debt?

If the debt is valid and you cannot establish grounds to set aside the demand, you have three options:

1. Pay the debt in full

Pay the full amount claimed in the demand within 21 days. Once paid, the demand lapses and the creditor cannot proceed with wind-up proceedings based on that demand.

2. Negotiate a payment plan

Contact the creditor immediately and propose a payment plan. If the creditor agrees in writing to withdraw the demand, you can avoid court proceedings. Get the agreement in writing and ensure the demand is formally withdrawn.

3. Prepare for wind-up proceedings

If you cannot pay and cannot set aside the demand, the creditor can file a wind-up application after the 21 days expire.

What happens if you do nothing?

If you do not respond within 21 days, your company is presumed insolvent. The creditor can file a wind-up application in the Supreme Court of Victoria, and the court will presume your company cannot pay its debts.

Consequences:

• The creditor can apply to wind up your company
• Directors face potential insolvent trading claims
• The company’s bank accounts may be frozen
• Suppliers and customers will be notified of the insolvency proceedings
• The company may be placed into liquidation

You lose the right to dispute the debt in the wind-up proceedings. The only defence is to prove the company is solvent, which requires detailed financial evidence and is difficult to establish.

How Claim Done helps with statutory demand responses

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: Responding to a statutory demand in Victoria

• [ ] Check the date of service and calculate the 21-day deadline
• [ ] Verify your company’s registered office address on ASIC
• [ ] Review the demand for defects or errors
• [ ] Gather all evidence supporting a genuine dispute or offsetting claim
• [ ] Decide whether to apply to set aside, pay, or negotiate
• [ ] If applying to set aside, prepare your affidavit and file within 21 days
• [ ] Serve the application on the creditor before the deadline expires
• [ ] If you cannot dispute the debt, contact the creditor immediately to negotiate

A statutory demand is not the end — but it is urgent. You have 21 days to act, so get legal advice straight away.

Frequently Asked Questions

Can I get an extension on the 21-day deadline to respond to a statutory demand in Victoria?

No. The 21-day deadline is absolute. The Supreme Court of Victoria has no power to extend it, even if you have a good reason. If you miss the deadline, your company is presumed insolvent and you lose the right to dispute the debt.

What happens if the statutory demand was sent to the wrong address?

If the demand was not served at your company’s registered office address as recorded with ASIC, service may be invalid. You can apply to set aside the demand on the basis of defective service. Check your ASIC records immediately and gather evidence of your correct registered address.

Do I need a lawyer to apply to set aside a statutory demand in Victoria?

You are not required to have a lawyer, but statutory demand applications are technical and time-sensitive. Claim Done does not prepare these applications, so get legal advice early.

Can I negotiate with the creditor after receiving a statutory demand?

Yes. If you contact the creditor within the 21-day period and reach an agreement, they can withdraw the demand in writing. Get the withdrawal confirmed in writing and ensure it is signed by the creditor. If the creditor refuses to negotiate, you will need to apply to set aside the demand or pay in full.

What is the minimum debt amount for a statutory demand in Victoria?

The minimum debt is $4,000 under the Corporations Act. If the debt is less than $4,000, the statutory demand is invalid and can be set aside. The debt must also be a liquidated sum — a specific, ascertained amount, not estimated damages.