What Is a Statutory Demand and Should You Be Worried If You Get One?

You open the mail. There’s a document titled “Creditor’s Statutory Demand for Payment of Debt” — Form 509H. Your company name is on it. A debt amount. A 21-day deadline. And a warning that failure to comply may result in your company being presumed insolvent.

Should you be worried? Yes. Should you panic? No — but you need to act fast.

What is a statutory demand?

A statutory demand is a formal debt recovery tool used against registered companies under the Corporations Act. It is not a court order. It is not a lawsuit. It is a notice that gives your company 21 days to:

• Pay the debt in full, or
• Secure or compound the debt to the creditor’s reasonable satisfaction, or
• Apply to the court to set it aside

If you do none of those things within 21 days, the law presumes your company is insolvent — and the creditor can apply to wind up (liquidate) your company without proving the debt in court.

That presumption is what makes a statutory demand powerful. Silence is treated as admission.

Who can issue a statutory demand?

Any creditor owed $4,000 or more by a registered company can issue a statutory demand. That includes:

• Suppliers and contractors
• Former employees (unpaid wages or entitlements)
• Landlords (unpaid rent)
• Customers (refunds not honoured)
• Business partners or co-directors
• The Australian Taxation Office (though the ATO typically uses Director Penalty Notices instead)

The creditor does not need a court judgment. They do not need to prove the debt first. They just need to believe the debt is owed and follow the correct form.

What does a valid statutory demand look like?

A statutory demand must be in the prescribed form — Form 509H under the Corporations Regulations. It must include:

• The exact name and ACN of the company debtor
• A description of the debt (invoice number, date, amount)
• The total amount claimed (must be at least $4,000)
• The creditor’s name and address
• A statement that the company has 21 days to comply
• A warning about the presumption of insolvency

The demand must be accompanied by an affidavit sworn by the creditor (or their solicitor) verifying the debt. The affidavit must be served with the demand — not filed in court yet, just served on the company.

If any of these elements are missing or incorrect, the demand may be defective — and you may be able to set it aside.

The 21-day clock starts when you are served

The 21 days begins from the date the statutory demand is served on your company — not the date it was prepared or posted.

Service is typically valid if the demand is:

• Delivered to the company’s registered office, or
• Left at the registered office during business hours, or
• Posted to the registered office (service is deemed to occur when it would arrive in the ordinary course of post)

Check your ASIC records. If your registered office address is out of date, you may not receive the demand in time — and the creditor can still proceed.

What happens if you do nothing?

If you do not respond within 21 days, the law presumes your company is insolvent. The creditor can then file an application to wind up your company.

At that point:

• The court does not re-examine whether the debt is owed — the presumption stands
• You cannot dispute the debt in the wind-up hearing (you should have applied to set aside the demand)
• The court will likely appoint a liquidator unless you can prove solvency by other means
• Directors may face personal liability if insolvent trading is found

Even if the debt is disputed, even if you believe the demand is wrong, silence is not an option. You must act within 21 days.

Can you dispute a statutory demand?

Yes — but only by applying to the court to set aside the demand. You have 21 days from service to file the application.

The court will typically set aside a statutory demand if:

There is a genuine dispute about the existence or amount of the debt. You must provide evidence — not just assert that you disagree. Invoices, emails, contracts, payment records, anything showing the debt is contested.

You have an offsetting claim against the creditor. For example, the creditor owes you money, or you have a counterclaim for damages. The offsetting claim must be genuine and quantified.

The demand is defective and the defect causes substantial injustice. Minor errors (like a typo in the company name) usually won’t void the demand unless they cause real prejudice. But missing affidavits, wrong debt amounts, or incorrect forms can be fatal.

Some other reason — for example, the debt has already been paid, or the demand was served on the wrong entity.

If you succeed, the demand is set aside and the creditor cannot use it to wind up your company. They must sue you in the normal way if they want to recover the debt.

Is a statutory demand a bluff?

Sometimes. Not always.

Some creditors issue statutory demands as a pressure tactic — hoping you will pay immediately rather than risk wind-up proceedings. If the debt is disputed, or if the creditor knows you can afford a lawyer, they may not follow through.

But many creditors are serious. If the debt is clear, the demand is valid, and you do nothing, they will file the wind-up application. Once that happens, the cost and reputational damage escalates fast.

Treat every statutory demand as a real threat until you have legal advice confirming otherwise.

What should you do if you receive one?

Step 1: Check the date of service. Count 21 days from when it was served (not when you opened it). Mark the deadline in your calendar. Miss it and you lose your right to challenge.

Step 2: Review the demand carefully. Is the debt amount correct? Is the company name and ACN correct? Is there an affidavit attached? Is the demand in Form 509H?

Step 3: Gather your evidence. If you dispute the debt, collect everything — invoices, contracts, emails, payment records, delivery dockets, anything showing the debt is wrong or already paid.

Step 4: Get legal advice immediately. Setting aside a statutory demand is a court application. You need a lawyer experienced in Corporations Act work. Do not wait until day 20.

Step 5: Consider your options. Can you pay the debt? Can you negotiate a payment plan? Can you prove a genuine dispute?

If you cannot afford a lawyer and the debt is genuinely disputed, you can apply to set aside the demand yourself — but the process is technical and the consequences of getting it wrong are severe.

Can you negotiate after receiving a statutory demand?

Yes — but the creditor is under no obligation to agree. Once a statutory demand is served, the creditor has the upper hand. They know you are on a 21-day clock.

If you want to negotiate:

• Contact the creditor immediately
• Propose a realistic payment plan or settlement
• Get any agreement in writing before the 21 days expire
• If they agree, ask them to withdraw the statutory demand in writing

If they refuse, you still need to apply to set aside the demand or pay in full. A verbal promise to “work something out” does not stop the clock.

How ClaimDone helps creditors issue statutory demands

If you are owed $4,000 or more by a registered company and they are ignoring your invoices, ClaimDone prepares your statutory demand in 60 minutes.

You complete a short online form. Upload your invoices and evidence. Our Proprietary AI Engine drafts Form 509H citing the Corporations Act, prepares the supporting affidavit template, and delivers everything ready for you to swear and serve.

Flat fee. No subscription. Australia-wide.

ClaimDone does not provide legal advice. For complex disputes, insolvency concerns, or if the debtor challenges your demand, consult a solicitor experienced in corporate debt recovery.

Final word

A statutory demand is not a court order, but it is a serious legal threat. If your company receives one, you have 21 days to pay, settle, or apply to set it aside. Do nothing and the law presumes your company is insolvent — and wind-up proceedings can follow.

If you believe the debt is wrong, disputed, or already paid, get legal advice immediately. If you cannot afford a lawyer, at least file an application to set aside the demand within the 21-day window — you can argue the merits later.

And if you are a creditor tired of chasing an unpaid debt from a company, ClaimDone prepares your statutory demand fast, correctly, and affordably.

Frequently Asked Questions

Can a statutory demand be issued to an individual or sole trader?

No. Statutory demands under the Corporations Act apply only to registered companies (Pty Ltd, Ltd). If the debtor is an individual or sole trader, you must use a different debt recovery method such as a letter of demand or court claim.

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

The minimum debt is $4,000 under the Corporations Act. If the debt is less than $4,000, you cannot issue a statutory demand — use a letter of demand or tribunal application instead.

Can I ignore a statutory demand if I dispute the debt?

No. Even if you genuinely dispute the debt, you must apply to the court to set aside the statutory demand within 21 days. If you do nothing, the law presumes your company is insolvent and the creditor can apply to wind up your company without proving the debt.

How much does it cost to set aside a statutory demand?

Court filing fees vary by state but are typically $500-$1,500. Legal costs for a solicitor to prepare and file the application typically range from $3,000 to $10,000 depending on complexity. If you lose, you may be ordered to pay the creditor’s legal costs as well.

What happens if the company is wound up after a statutory demand?

If the court orders your company to be wound up, a liquidator is appointed to sell the company’s assets, pay creditors, and investigate whether directors traded while insolvent. Directors may face personal liability, disqualification, or criminal charges if insolvent trading is proven.