What is a statutory demand?
In short
A statutory demand is a formal written demand for payment of a debt owed by a company, issued under section 459E of the Corporations Act 2001. If the company does not pay, settle, or apply to set the demand aside within 21 days, it is presumed insolvent — which can support an application to wind the company up.
A statutory demand is one of the most powerful debt-recovery tools available against a company. It is a formal instrument under Part 5.4 of the Corporations Act 2001 (Cth), not merely a strongly worded letter.
How a statutory demand works
The creditor serves the demand on the debtor company. From the date of valid service, the company has 21 days to pay the debt, come to an arrangement, or apply to the court to set the demand aside. If it does none of these, the company is presumed to be insolvent.
Why it is effective
The presumption of insolvency is what gives a statutory demand its force: it can be used to support a winding-up application. For a solvent business that simply has not paid, that consequence is a strong incentive to resolve the debt quickly.
When it is appropriate
A statutory demand suits a clear, undisputed company debt over the statutory minimum ($4,000). It is not the right tool for a genuinely disputed debt — see the related guides below.
Do not use a statutory demand for a genuinely disputed debt. If the debtor disputes the debt on genuine grounds, or has an offsetting claim, a statutory demand can be set aside and cost orders may follow. If in doubt, seek advice before proceeding.
References
- Corporations Act 2001 (Cth) — incl. s 459E (statutory demand)
- Corporations Regulations 2001 — prescribed form and statutory minimum
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