Statutory Demand for Company Debt: When Can You Issue One?

If a registered company owes you money and refuses to pay, a statutory demand is the nuclear option. It gives the company 21 days to pay the debt — or you can apply to wind them up.

But you cannot issue one for every unpaid invoice. There are strict requirements, and if you get it wrong, the demand can be set aside and you may be liable for costs. This guide explains exactly when you can issue a statutory demand for company debt in Australia.

What is a statutory demand?

A statutory demand is a formal notice served under the Corporations Act 2001. It is used to recover a debt owed by a registered company (Pty Ltd or Ltd). The demand must be in the prescribed form (Form 509H) and accompanied by a supporting affidavit.

The statutory demand states the amount owed, the basis of the debt, that the company has 21 days to pay or apply to set aside the demand, and that failure to comply may result in a presumption of insolvency and wind-up proceedings.

You do not file it with a court. You serve it directly on the company. But if the company does not respond within 21 days, you can then apply to the Federal Court or Supreme Court to wind up the company on the basis of presumed insolvency.

The $4,000 threshold

You can only issue a statutory demand if the debt is at least $4,000. This is the statutory minimum under the Corporations Act.

If the debt is less than $4,000, you cannot use a statutory demand. You will need to pursue the debt through other means — a letter of demand, tribunal application, or small claims court.

If you are owed multiple debts by the same company, you can aggregate them to meet the $4,000 threshold — as long as each debt is liquidated and undisputed.

Example: A graphic designer is owed $1,800 for one project and $2,500 for another by the same company. Total: $4,300. A statutory demand can be issued for the combined amount.

The debt must be liquidated

A liquidated debt is a specific, ascertained amount. It is not an estimate or a claim for unliquidated damages.

Liquidated debts include:

• Unpaid invoices for goods or services supplied
• Outstanding loan amounts
• Amounts due under a written contract
• Court judgments or tribunal orders

Unliquidated debts include:

• Claims for damages where the loss is not yet quantified
• Claims for compensation where the amount is disputed
• Claims based on tort

If the amount is not liquidated, the statutory demand will typically be set aside.

The debt must be undisputed

You cannot use a statutory demand to recover a genuinely disputed debt. If the company has a legitimate dispute about whether the debt is owed, or about the amount, the court will set aside the demand.

A genuine dispute does not mean the company simply says “we don’t owe it.” The dispute must be raised in good faith, supported by some evidence or arguable basis, and not a sham or delaying tactic.

Example of a genuine dispute: You invoice a company for $5,000 for consulting services. The company responds that the work was defective and did not meet the agreed scope. They provide emails showing the issues raised during the project. This is likely a genuine dispute — a statutory demand would be inappropriate.

Example of a sham dispute: You invoice a company for $5,000 for goods delivered and signed for. The company responds three months later, after receiving the statutory demand, claiming the goods were defective — but provides no evidence and did not raise the issue at the time. This is likely not a genuine dispute.

If there is a genuine dispute, you should resolve it through negotiation, mediation, or court proceedings before issuing a statutory demand.

The company must be registered

A statutory demand can only be issued to a registered company — a Pty Ltd or Ltd entity registered with ASIC (Australian Securities and Investments Commission).

You cannot issue a statutory demand to:

• An individual (sole trader)
• A partnership
• A trust (unless the trustee is a registered company)
• An unregistered business name

If the debtor is an individual, you would issue a letter of demand for smaller debts instead, and if necessary, pursue the debt through a tribunal or court.

You can check if the debtor is a registered company by searching the ASIC register at abr.business.gov.au or asic.gov.au.

Form 509H and the supporting affidavit

A statutory demand must be in the prescribed form — Form 509H under the Corporations Regulations 2001. If you use the wrong form or fail to include required information, the demand can be set aside.

Form 509H must include:

• The name and ACN/ABN of the company
• The amount of the debt
• A description of the debt
• The creditor’s details
• A statement that the company has 21 days to pay or apply to set aside the demand

The statutory demand must be accompanied by an affidavit verifying the debt. The affidavit must be sworn by the creditor (or an authorised person), state the facts supporting the debt, attach copies of the invoices, contracts, or other evidence, and be sworn before a Justice of the Peace, solicitor, or other authorised person.

The affidavit is critical. If it is defective or does not properly verify the debt, the demand can be set aside.

The 21-day rule

Once the statutory demand is served, the company has 21 days to pay the debt in full, apply to the court to set aside the demand, or do nothing.

If the company does nothing — does not pay and does not apply to set aside — then after 21 days, the company is presumed to be insolvent under the Corporations Act.

This presumption of insolvency allows you to apply to wind up the company without having to prove insolvency. The burden shifts to the company to prove it is solvent.

What happens if the company applies to set aside the demand?

The company can apply to the court to set aside the statutory demand within 21 days. Common grounds include:

• There is a genuine dispute about the debt
• The debt is not liquidated
• The debt is less than $4,000
• The demand is defective (wrong form, missing affidavit, etc.)
• There is an offsetting claim that reduces the debt below $4,000

If the company applies to set aside, the matter goes to court. The court will decide whether the demand should be set aside. If the demand is set aside, you cannot rely on it to wind up the company, and you may be ordered to pay the company’s legal costs.

If the application to set aside fails, the company must pay the debt plus your costs of defending the application.

What happens if the company does not respond?

If the company does not pay and does not apply to set aside the demand within 21 days, you can apply to the Federal Court or Supreme Court to wind up the company.

The court will issue a winding-up order unless the company can prove it is solvent or that there is some other reason to refuse the order.

Once a winding-up order is made, a liquidator is appointed, the company’s assets are sold, creditors are paid in order of priority, and the company is deregistered.

Important: Winding up a company is a serious step. It is expensive (liquidator’s fees, court costs) and time-consuming. It is not a guaranteed way to recover your debt — if the company has no assets, you may recover nothing. But it is often effective as a threat, because directors face personal consequences if the company is wound up while insolvent.

When not to use a statutory demand

Do not issue a statutory demand if:

• The debt is less than $4,000
• The debt is genuinely disputed
• The debt is unliquidated
• The debtor is an individual or unregistered entity
• You are not prepared to follow through with wind-up proceedings if the demand is ignored

If any of these apply, use a letter of demand or pursue the debt through a tribunal or court.

How ClaimDone prepares your statutory demand

ClaimDone prepares Form 509H and the supporting affidavit template for $197. The process takes 60 minutes.

What you provide:

• Details of the company (name, ACN, registered address)
• Details of the debt (invoices, contracts, correspondence)
• Your details (name, address, ABN if applicable)

What ClaimDone delivers:

• Completed Form 509H citing the Corporations Act 2001
• Affidavit template with your evidence attached
• Instructions for swearing the affidavit and serving the demand

You then arrange for the affidavit to be sworn before a JP or solicitor, and serve the statutory demand on the company’s registered office. ClaimDone does not serve the demand for you — service must be done in accordance with the Corporations Act (typically by hand delivery or registered post to the registered office).

What to do after serving the demand

After you serve the statutory demand:

1. Wait 21 days — the company has 21 days from the date of service to respond
2. Keep records — keep proof of service (affidavit of service or Australia Post receipt)
3. Monitor ASIC — check if the company applies to set aside the demand (you will typically be notified by the court if they do)
4. If no response — after 21 days, you can apply to wind up the company or use the presumption of insolvency in other proceedings

If the company pays, the matter is resolved. If the company applies to set aside, you will need to defend the application (you may need a lawyer for this). If the company does nothing, you can proceed with wind-up proceedings.

Use it carefully

A statutory demand is the most powerful debt recovery tool in Australia. It is fast, it is cheap to prepare, and it puts enormous pressure on the company to pay. But it is not a bluff. If you issue a statutory demand, you must be prepared to follow through.

If the demand is defective or inappropriate, you may face a costs order. If the company is genuinely insolvent and has no assets, winding it up may cost you more than you recover.

Use a statutory demand when the debt is clear, liquidated, and undisputed, the amount is $4,000 or more, the debtor is a registered company, and you are prepared to take wind-up proceedings if necessary.

ClaimDone prepares your statutory demand (Form 509H) and supporting affidavit template for $197. Upload your invoices and evidence, answer a few questions, and our Proprietary AI Engine drafts the documents citing the Corporations Act 2001. You then arrange for the affidavit to be sworn and serve the demand on the company. Flat fee. No subscription. Prepared in 60 minutes. Prepare your statutory demand now and give the company 21 days to pay or face wind-up proceedings.

Frequently Asked Questions

Can I issue a statutory demand for a debt under $4,000?

No. The minimum debt for a statutory demand is $4,000 under the Corporations Act 2001. If the debt is less than $4,000, you will need to use a letter of demand or pursue the debt through a tribunal or small claims court.

What happens if the company disputes the debt after I serve the statutory demand?

The company has 21 days to apply to the court to set aside the demand. If they can show a genuine dispute, the court will typically set aside the demand. If the dispute is a sham or delaying tactic, the court will dismiss the application and the demand stands.

Can I issue a statutory demand to a sole trader or partnership?

No. A statutory demand can only be issued to a registered company (Pty Ltd or Ltd). If the debtor is an individual, sole trader, or partnership, you would issue a letter of demand or final demand instead.

Do I need a lawyer to issue a statutory demand?

No. You can prepare and serve a statutory demand yourself using Form 509H and a supporting affidavit. ClaimDone prepares both documents for you. However, if the company applies to set aside the demand or you proceed with wind-up proceedings, you may need a lawyer.

What if the company ignores the statutory demand?

If the company does not pay or apply to set aside the demand within 21 days, the company is presumed to be insolvent. You can then apply to the Federal Court or Supreme Court to wind up the company. The company will need to prove it is solvent to avoid a winding-up order.