You served a statutory demand. The company owes you money. Twenty-one days have passed. They have not paid. They have not applied to set it aside. Now what?
This article walks through what happens when a statutory demand is ignored, the timeline for winding up proceedings, and whether you can still negotiate once the deadline has expired.
The 21-Day Statutory Period
A statutory demand gives the debtor company 21 days from the date of service to either:
- Pay the debt in full
- Secure or compound the debt to the creditor’s reasonable satisfaction
- Apply to the court to set aside the demand
If the company does none of these things within 21 days, it is presumed to be insolvent under the Corporations Act. That presumption shifts the burden. The company must now prove it is solvent if you apply to wind it up.
What Happens After Day 21
Once the 21-day period expires without payment or a set-aside application, you have three months to file a winding up application in the Federal Court or Supreme Court.
The three-month window runs from the end of the 21-day compliance period. If you do not file within that time, the statutory demand lapses and you must serve a fresh one.
The Presumption of Insolvency
The company is presumed insolvent if it fails to comply with a statutory demand. This presumption applies in any winding up application you file.
The company can rebut the presumption by proving it is solvent — that it can pay all its debts as and when they become due. The onus is on them, not you.
In practice, most companies that ignore a statutory demand cannot prove solvency. If they could pay, they would have paid within 21 days.
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Filing a Winding Up Application
If the company has not paid and the 21 days have passed, you can file an originating process to wind up the company in insolvency.
The application is typically filed in:
- Federal Court — if the company is registered in any state or territory
- Supreme Court — in the state where the company’s registered office is located
You will need:
- The originating process
- An affidavit verifying service of the statutory demand
- An affidavit verifying non-compliance with the demand
- Evidence that the company has not applied to set aside the demand
- Court filing fees (typically around $1,300 in Federal Court, varies by state in Supreme Court)
The Court Hearing
Once filed, the court will set a hearing date. The company will be served with the application. At the hearing, the court will consider:
- Whether the statutory demand was validly served
- Whether the 21-day period has expired
- Whether the company has paid, secured, or compounded the debt
- Whether the company can prove solvency
If the company cannot prove solvency, the court will typically make a winding up order. A liquidator will be appointed. The company’s assets will be sold. Creditors will be paid in order of priority.
Can You Still Negotiate After 21 Days?
Yes. Nothing stops you from negotiating after the statutory demand period expires.
Many creditors use the expired demand as leverage. The company knows you can file a winding up application at any time. That pressure often brings them to the table.
You can agree to:
- A payment plan
- A reduced settlement amount
- Security over company assets
- A personal guarantee from directors
If you reach an agreement, document it properly. Use a deed of settlement or acknowledgment of debt. Do not rely on verbal promises.
Should You Still File?
Even if you are negotiating, consider filing the winding up application within the three-month window. You can always withdraw it if the company pays or you reach a settlement.
If you do not file within three months, the statutory demand lapses. You lose the presumption of insolvency. You would need to serve a fresh demand and wait another 21 days.
What If the Company Applies to Set Aside Late?
The company has 21 days from service to apply to set aside the demand. If they apply within that time, the demand is stayed. You cannot rely on it until the application is determined.
But what if they apply late — after the 21 days have expired?
The court typically has no power to extend the 21-day deadline. If the company misses the deadline, they generally cannot set aside the demand.
However, if you file a winding up application, the company can still oppose it by proving solvency. They can also apply to adjourn the hearing if there is a genuine dispute about the debt.
In practice, late applications rarely succeed unless there is clear evidence the demand was not properly served.
What If the Company Goes Into Voluntary Administration?
If the company appoints a voluntary administrator, your winding up application is automatically stayed.
The administrator takes control. Creditors vote on whether to accept a deed of company arrangement or wind up the company.
You remain a creditor. You can vote. But you cannot proceed with your winding up application while the administration is ongoing.
If the administration fails and no deed is approved, the company will likely be wound up anyway.
Costs of Winding Up
Winding up is not free. You will typically pay:
- Court filing fees (around $1,300 in Federal Court)
- Liquidator’s fees (paid from the company’s assets, but if there are no assets, you may not recover anything)
If the company is wound up and there are insufficient assets to pay creditors, you may recover nothing — even if you win.
That is why many creditors use the statutory demand as a negotiation tool rather than proceeding all the way to liquidation.
When to Walk Away
Not every debt is worth pursuing to winding up. Consider walking away if:
- The company has no assets
- The debt is small relative to the cost of winding up
- The company is already in administration or liquidation
- You have already recovered enough through negotiation
Winding up is a powerful remedy, but it is not always the most commercial outcome.
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Frequently Asked Questions
Can I still negotiate after the 21-day statutory demand period expires?
Yes. Many creditors use the expired demand as leverage to negotiate payment plans or settlements. The company knows you can file a winding up application at any time, which often brings them to the table. Document any agreement in a deed of settlement or acknowledgment of debt.
What happens if I don't file a winding up application within three months?
The statutory demand lapses. You lose the presumption of insolvency. If you still want to pursue winding up, you must serve a fresh statutory demand and wait another 21 days.
Can the company apply to set aside the statutory demand after 21 days?
Generally no. The court typically has no power to extend the 21-day deadline. If the company misses the deadline, they generally cannot set aside the demand. However, they can still oppose a winding up application by proving solvency.
What if the company has no assets to pay creditors?
If the company is wound up and has no assets, you may recover nothing — even if you win. That is why many creditors use the statutory demand as a negotiation tool rather than proceeding all the way to liquidation. Consider the cost-benefit before filing a winding up application.
Do I need a lawyer to file a winding up application?
It is strongly recommended. Winding up applications are filed in the Federal Court or Supreme Court and involve complex procedural requirements.
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