Facing a statutory demand can be stressful and confusing, especially when your company’s survival is at stake.
Statutory demands are sometimes referred to as the “nuclear option” due to their potential to lead to a company’s liquidation.
Failing to respond to a statutory demand in a timely manner can have significant consequences, including liquidation.
At Pherrus, our team provides expert statutory demand services to help you assess the claim, protect your company’s assets, and take swift, informed action to avoid winding up proceedings and further legal costs.
Whether the statutory demand has been issued by a creditor or the Australian Taxation Office (ATO), our accountants and legal consultants can guide you through every step from understanding your financial position to negotiating a payment plan or filing an application to set aside the demand.
Consistent communication, clear compliance, and reliable accounting support.
What Is a Statutory Demand?
A statutory demand is a formal, written request requiring a debtor company to pay a debt within a statutory period of 21 days, served under Section 459E of the Corporations Act 2001 (Cth).
It allows a creditor (including the ATO) to demand payment of a debt of $4,000 or more, known as the statutory minimum.
A statutory demand can only be issued if there is a debt that is due and payable, totaling at least $4,000.
The statutory demand must be in writing and in accordance with the prescribed form, Form 509H.
The statutory demand must be properly served on the debtor company’s registered office as recorded with ASIC.
The statutory demand must specify the amount owed and provide details of the debt, including any relevant invoices or agreements.
The statutory demand must require compliance within the statutory period after the company receives the demand.
The time period for compliance with a statutory demand cannot be extended by the Court.
This document must be served at your company’s registered office and gives you 21 days to:
- Pay the debt in full;
- Negotiate a payment plan; or
- Challenge the validity of the demand in court.
If you do nothing within the 21‑day period, the Corporations Act presumes your business is insolvent, meaning it cannot pay its debts as they fall due.
This can quickly lead to a winding up application in the Federal or Supreme Court, where a court order could force your company into liquidation.
How Pherrus Can Help With Statutory Demand Services
At Pherrus, our experienced accountants and consultants deliver end‑to‑end support for businesses facing statutory demands.
We tailor our services to the specific circumstances of each client, and provide all relevant documents such as contracts, invoices, and correspondence which is essential for a successful outcome.
Legal assistance is crucial for creditors to navigate the complexities of statutory demands and winding up notices, and companies facing statutory demands should seek professional legal advice to understand their rights and obligations.
1. Assess the Validity of the Demand
Our experts will review the demand to determine whether it complies with legal requirements.
If the notice contains irregularities such as the wrong address, incorrect amount, or a disputed debt then we can assist you with an application to have the demand set aside.
When applying to set aside a statutory demand, it is important to provide relevant documents, such as contracts, invoices, and correspondence, to support a genuine dispute or offsetting claim.
A company can apply to the Court to set aside a statutory demand if there is a genuine dispute about the debt.
An offsetting claim may exist where the creditor is also indebted to the company, allowing the company to apply to the Court for the debt to be offset.
A statutory demand may be set aside by the Court if there is a defect in the demand that will cause substantial injustice to the company.
A demand may also be invalid if complying would cause substantial injustice, or if there’s a genuine dispute or offsetting claim against the creditor.
2. Financial Position Review
We’ll conduct a full analysis of your company’s financials by evaluating cash flow, liabilities, and your ability to pay the debt.
Understanding your position is crucial to determining the most viable path forward, whether through repayment, negotiation, or defence.
3. Negotiating with Creditors
If repayment isn’t immediately possible, we can negotiate a payment plan or settlement that balances your company’s interests while satisfying the ATO or other creditors.
We’ll prepare all required financial documentation such as profit-and-loss statements, current liabilities, and forecasts to support your proposal.
Failure to respond to a statutory demand often results in immediate negotiations from debtors seeking to avoid liquidation.
It is crucial to negotiate with creditors in a timely manner to prevent escalation to winding up proceedings.
4. Responding to the Statutory Demand
If appropriate, we prepare and file your written response or set‑aside application with supporting evidence.
A company has 21 days after being served with a statutory demand (the statutory period) to comply with the demand, negotiate with the creditor, or apply to the court to set it aside.
Any application to set aside a statutory demand must be supported by affidavit evidence and direct and admissible proof, as required by the Evidence Act.
We liaise with solicitors to ensure that all legal proceedings are handled meticulously and within the strict statutory timeframe.
5. Protecting Your Business Against Future Demands
Once the immediate crisis is managed, we continue to support your business with ongoing financial management advice to strengthen cash flow and prevent repeat issues.
If insolvency becomes unavoidable, Pherrus can connect you with a trusted insolvency practitioner to help manage the process and minimise commercial impact.
What Happens If You Fail to Respond to a Statutory Demand?
If you fail to comply with a statutory demand, the creditor can file a winding up application against your company.
If a company does not respond to a statutory demand within 21 days, it is presumed insolvent under the Corporations Act.
After the 21-day statutory period expires, the company is presumed by law to be insolvent, and the creditor can apply to the court for a winding up order.
A winding up application filed following a failure to comply with the statutory demand will be recorded with ASIC against the company.
The presumption of insolvency allows the creditor to apply for a winding up order and the appointment of a liquidator.
A costs order may be made against the company in winding up proceedings, and a judgment debt can be used as evidence to support insolvency.
In many cases, the company’s directors lose control over the business. The company will cease operations, and outstanding debts may trigger legal proceedings or costs orders.
This is why it’s critical to act within the 21‑day period. Pherrus can help you respond quickly and correctly to reduce exposure to substantial injustice or further financial damage.
What Does ‘Set Aside’ Mean in Statutory Demand Law?
To set aside a statutory demand, you must file an application in the appropriate court (usually the Federal or Supreme Court) within 21 days of service.
A company can apply to the court to set aside the statutory demand if there are valid grounds, and the court may set aside the statutory demand if there is a defect in the demand that will cause substantial injustice unless it is set aside.
Valid grounds to set aside a demand include:
- The demand is defective or invalid;
- There’s a genuine dispute about the debt or amount;
- You have an offsetting claim against the creditor;
- Compliance would cause substantial injustice; or
- There’s another reason the court deems appropriate.
Pherrus helps prepare such an application efficiently, ensuring all evidentiary requirements are met to give your business the best possible chance of success.
Why Choose Pherrus for Statutory Demand Services?
Pherrus is not only a financial consultancy. We’re a team of accountants, bookkeepers. insurance advisors, and tax experts who understand what’s at stake when a company is facing insolvency threats.
We specialise in:
- Early intervention to prevent a winding up application;
- Skilled negotiation with the ATO and private creditors;
- Legal collaboration with lawyers experienced in Corporations Act matters;
- Expert financial analysis and debt recovery guidance.
With our tailored approach, you can respond confidently, protect your company’s reputation, and rebuild your financial stability.
FAQs
What is the Purpose of a Statutory Demand?
A statutory demand is issued by a creditor to compel payment of an unpaid debt. If the company fails to pay or set aside the demand within 21 days, the creditor can assume the company cannot pay its debts and apply for it to be wound up in court.
Can a Statutory Demand Be Reversed Once Issued?
Yes. You may apply to have a demand set aside in court if it’s defective, disputed, or likely to cause substantial injustice.
Immediate action and professional advice are critical, as strict time limits apply.
What Happens During Winding Up Proceedings?
If your company doesn’t respond, the creditor can apply for a court order to liquidate the business.
During liquidation, the appointed liquidator will sell the company’s assets to pay creditors.
The appointed liquidator sells company assets, pays off debts, and closes the business. This process often results in significant legal costs and loss of control for the directors.
What Are My Options After Receiving a Statutory Demand?
When a company receives a statutory demand, it must act promptly to avoid serious legal consequences, such as the risk of winding up proceedings if the demand is not addressed within the specified timeframe.
You can:
- Pay the debt in full;
- Negotiate with the creditor for a payment plan; or
- Seek to have the demand set aside through Pherrus and your legal advisers if you have a genuine claim or disputed debt.
What is the Statutory Minimum Debt for Issuing a Statutory Demand?
Under the Corporations Act, the statutory minimum is $4,000.
A creditor cannot issue a demand if the debt is below this threshold.
Contact Pherrus: Your Trusted Partner in Statutory Demand Support
If you’ve received a statutory demand or need help with debt recovery, Pherrus can guide you through the process and protect your business from unnecessary risk.
We’ll assess the demand, explain your legal options, and develop a strategy to safeguard your company’s future.
Call Pherrus Financial Services today on (02) 9099 9109 or fill out our online contact form to arrange a confidential consultation at our Sydney office.
Your company’s financial future deserves the right defence, and Pherrus is here to deliver it!
