What Happens After You File a Statutory Demand in Australia?

You’ve served a statutory demand on a company that owes you money. The Form 509H has been delivered, the affidavit sworn. Now what?

The next 21 days determine whether you recover your debt or escalate to winding up proceedings. Here’s what the debtor can do, what happens if they apply to set aside, and your path forward if they ignore the demand entirely.

The 21-Day Window Starts When the Demand Is Served

The clock starts the moment the statutory demand is properly served on the company’s registered office address as listed on the ASIC register.

Once served, the debtor company has 21 days to:

• Pay the debt in full
• Secure or compound the debt to your reasonable satisfaction
• Apply to the court to set aside the demand

If the company does none of these, it has failed to comply with the demand. If you then apply to wind up the company within 3 months of that failure, the court must presume the company is insolvent (s459C(2)(a)).

The 21-day period is strict. Courts rarely extend it except in exceptional circumstances, and only if an application to set aside is already filed.

Option 1: The Company Pays the Debt

The company pays the full amount claimed in the statutory demand, plus any interest specified. Once paid, the matter ends. You do not need to file anything with the court.

If the company offers partial payment or a payment plan, you can accept it — but only if you are satisfied the debt is secured or compounded to your reasonable satisfaction. Accepting less than the full amount without proper documentation may cost you the right to rely on the demand.

Best practice: if you agree to a payment arrangement, document it in a formal deed of settlement or acknowledgment of debt before withdrawing the statutory demand.

Option 2: The Company Applies to Set Aside the Demand

Under s459G Corporations Act, the debtor company can apply to the court to set aside the statutory demand. The application must be filed within 21 days of service and must be accompanied by an affidavit setting out the grounds.

Grounds for Setting Aside

The court can set aside a statutory demand if:

• Genuine dispute — there is a genuine dispute about the existence or amount of the debt (s459H)
• Offsetting claim — the company has an offsetting claim against you that brings the undisputed debt below $4,000; it can come from a different transaction (s459H)
• Defect in the demand — the demand contains a defect that will cause substantial injustice if not set aside (s459J)
• Other reason — some other reason exists, including if the demand was served in bad faith or for an improper purpose (s459J)

The most common ground is genuine dispute. The company does not need to prove the dispute will succeed — only that it is genuine and not spurious or hypothetical.

What Happens During a Setting Aside Application

Once the application is filed:

1. The court lists a hearing date
2. Both parties file evidence — affidavits and supporting documents
3. You can file a reply affidavit responding to the company’s claims
4. The matter is heard before a judge, often on the papers without oral evidence
5. The judge decides whether to set aside the demand, vary it, or dismiss the application

If the demand is set aside, you lose the presumption of insolvency and cannot rely on that demand to wind up the company. You may need to pursue the debt through other means — tribunal, court, or a fresh statutory demand if the defect can be cured.

If the application is dismissed, the company has until 7 days after the court’s decision to comply with the demand, unless the court orders a different period (s459F(2)). If it still does not comply, you can proceed to winding up.

Costs

If the company’s application is dismissed, you can usually recover your legal costs. If the demand is set aside due to a defect you caused, you may be ordered to pay the company’s costs.

Option 3: The Company Does Nothing

If the company does not pay, secure, compound, or apply to set aside the demand within 21 days, it has failed to comply with the demand. The presumption of insolvency is then available to you in a winding up application made within 3 months of that failure (s459C(2)).

You can then apply to the court for an order to wind up the company under s459P Corporations Act.

Filing a Winding Up Application

You must file:

• Originating process — the formal application to wind up the company
• Affidavit in support — verifying service of the statutory demand, the debt, and the failure to comply
• Copy of the statutory demand and proof of service

The application is filed in the Federal Court or the Supreme Court of your state, depending on jurisdiction and the company’s registered office location.

What Happens Next

Once the winding up application is filed:

1. The court issues a hearing date
2. The company is served with the application
3. The company can oppose the winding up by filing evidence showing the debt has been paid, there is a genuine dispute, or the company is solvent despite the presumption
4. If the company does not oppose, the court will likely make a winding up order
5. A liquidator is appointed to take control of the company’s assets and affairs

The Company’s Last Chance to Oppose

Even after a winding up application is filed, the company can still oppose on limited grounds. The most common is proving solvency — showing the company can pay its debts as and when they fall due, despite the statutory demand.

The onus is on the company to rebut the presumption. If it cannot, the court will make the winding up order.

Costs of Winding Up

If the winding up order is made, the company (or its liquidator) will usually be ordered to pay your costs of the application. Those costs are then a debt provable in the winding up, though you may not recover them in full if the company has insufficient assets.

What If the Debt Is Disputed After the Demand Is Served?

If the company raises a genuine dispute for the first time after the 21-day period has expired, it is generally too late. The company should have applied to set aside the demand within the 21 days.

However, if the company can show the dispute arose after the demand was served, or that it was not aware of the demand due to defective service, the court may still consider the dispute at the winding up hearing. This is rare.

Timeline Summary

Here’s the typical timeline after a statutory demand is served:

• Day 0: Statutory demand served on the company’s registered office
• Day 1-21: Company must pay, secure, compound, or apply to set aside
• Day 22: If no action taken, the company has failed to comply, and the presumption of insolvency is available in a winding up application made within 3 months
• Day 22+: You can file a winding up application
• After filing: Winding up hearing listed
• Hearing date: Court decides whether to wind up the company or dismiss the application

If the company applies to set aside, the timeline pauses until that application is resolved.

Practical Considerations

Keep proof of service. You will need to prove the demand was properly served if the matter goes to court. Use registered post or a process server, and keep all receipts and tracking records.

Monitor ASIC. Check the company’s ASIC record regularly. If the company is deregistered or placed into voluntary administration, your statutory demand may be affected.

Consider settlement. Many companies will negotiate once a statutory demand is served. If you can recover the debt without going to court, that is usually the better outcome.

Do not delay. Apply to wind up within 3 months of the failure to comply, or you lose the presumption of insolvency (s459C(2)).

How Claim Done Helps

Claim Done prepares your statutory demand (Form 509H) and supporting affidavit template for a flat fee of $97. You tell us what evidence you have, answer a few questions, and our Programmatic Algorithms generate the completed documents citing the applicable sections of the Corporations Act.

You check the documents, sign and date the demand, have the affidavit sworn, and serve the demand yourself.

Final Takeaway

After you serve a statutory demand, the debtor company has three choices: pay, apply to set aside, or do nothing. If they do nothing, you can apply to wind up the company and force liquidation.

The 21-day period is strict. If they do not, the law gives you a clear path to enforcement.

If you are owed $4,000 or more by a registered company, prepare your statutory demand in about 5 minutes with Claim Done — citing the law, for you to check, sign and serve yourself.

Frequently Asked Questions

Can the company negotiate after the 21 days have expired?

Yes, but you are not obliged to accept. Once the 21-day period ends without compliance, you can file a winding up application, and the presumption of insolvency is available if you apply within 3 months. If the company offers payment or a settlement after that point, you can choose to accept it and withdraw your application, but you should document the agreement properly.

What if the company claims it never received the statutory demand?

Service must be proved. If you served the demand by registered post or process server and have proof of delivery to the registered office, the company cannot claim non-service. If service was defective, the company can apply to set aside the demand on that basis, but it must do so within 21 days after the demand was served (s459G(2)).

Can I serve a statutory demand on a sole trader or partnership?

No. Statutory demands under s459E Corporations Act can only be served on registered companies (Pty Ltd or Ltd). Sole traders and partnerships are not subject to winding up proceedings. For those debtors, use a letter of demand or tribunal application instead.

What happens if the company goes into voluntary administration after I serve the demand?

If the company appoints a voluntary administrator under Part 5.3A Corporations Act, your statutory demand is stayed and you cannot proceed to winding up. You must lodge a proof of debt with the administrator and participate in the administration process. The administrator will decide whether to pay creditors, execute a deed of company arrangement, or recommend liquidation.

How much does it cost to wind up a company after the statutory demand is not complied with?

Filing fees vary by court (Federal Court or Supreme Court) but are typically $1,000-$2,000. Legal costs for preparing and filing the winding up application depend on complexity. If the winding up order is made, you can usually recover those costs from the company, but only if there are sufficient assets in the liquidation.