In Australia, a statutory demand is a document used by creditors requesting the debtor to repay within a stipulated time frame. Once served, the debtor must respond within 21 days.

In this article, we’ll help you understand statutory demands in depth, and we’ll explain how they are served and what to do if you receive one. The information in this article is general in nature, so if you’re considering making a statutory demand or you’ve received one, then we highly recommend reaching out to one of our experienced dispute lawyers to know exactly where you stand in your specific situation.

Understanding Statutory Demand In Australia

A statutory demand in Australia is a formal document that a creditor sends to a debtor company requesting that they clear the outstanding debt. The Corporations Act 2001 explains the laws surrounding statutory demands in Australia.

Under the act, the following must be met for a creditor to serve a statutory demand:

  • The debtor is a registered company
  • The total debt(s) owed is more than $4,000
  • The debt owed is due and payable
  • The debtor and creditor have no dispute about the amount or existence of the debt

Who Can Issue A Statutory Demand?

Companies with unpaid debts can use statutory demands to recover their money from debtors. A business or service provider can also send a demand to a company requesting that they clear pending invoices.

Creditors can also file a statutory demand if the debtor company hasn’t paid a judgment debt that the court ordered. Generally, statutory demands provide a legal framework for creditors to claim unpaid judgments, debts, or invoices from registered companies.

Formal Requirements For Statutory Demands In Australia

The Corporations Act 2001 sets out the formal requirements a statutory demand must meet for it to be valid. The document must:

  • Clearly outline the total amount of debt owed
  • Mention the debtor company’s name and registered office address
  • Clearly and accurately specify the creditor (s) and debtor company
  • Have the signatures of the creditor or their representing agent
  • Be in written form and use the prescribed Form 509 (H)
  • Mention a specific location in Australia where the debtor can pay the owed amount. It might be the creditor’s office
  • Attach an affidavit to verify the owed debt is due and payable

If you’re a creditor seeking to recover your debt, it’s essential to consult with a commercial law expert to help draft a valid statutory demand.

How Statutory Demand Is Served

A creditor can serve a statutory demand by delivering it in person or sending it via post to the debtor’s registered office address. If you aren’t sure of the address or if it has changed, you can send the statutory demand to the company’s top officials, like the director(s).

What To Do If You Receive A Statutory Demand

If a company you own or direct receives a statutory demand, you should find the best way to address it to avoid legal problems. The first viable option is clearing the entire debt and requesting the creditor withdraw the demand.

What if my company has financial challenges? Speak out and bring the creditor on board for negotiations. Come up with a payment plan or an arrangement that works for both parties and have it in writing for future reference.

What Happens If You Don’t Respond To A Statutory Demand In Australia?

Australian law stipulates that a debtor company has up to 21 days to respond to a statutory demand. When the period lapses without any response, the company is deemed insolvent. A company is presumed to be insolvent if it’s unable to clear its bills.

After the insolvency presumption, the creditor can request the court to wind up your company. In this situation, the court may order the liquidation of your company, which could have adverse effects on your business.

How? Creditors can publish an insolvency notice on the Australian Securities and Investments Commission (ASIC) website. Other creditors might see the notice and demand payments or appear in court to support your company’s winding up order.

This situation can cause the court to order your company’s liquidation to raise funds to pay off the creditors. However, you can work with an insolvency lawyer to prove your company is solvent and able to clear the debts.

How To Set Aside A Statutory Demand

You only have 21 days after receiving a statutory demand to set it aside. Due to this limited time, it is advisable to contact an experienced dispute lawyer for legal advice and assistance navigating the court processes.

You must provide a genuine reason to the court to demonstrate the need to set aside the statutory demand. These include:

  • Proof that there’s a valid dispute surrounding the debt
  • The debt is incorrect
  • Defects on how the creditor served the statutory demand
  • There’s an offsetting claim that reduces the debt to below the minimum $4,000
  • Other reasons, like an invalid affidavit

The court can set the demand aside if the reasons are valid. Alternatively, the creditor might receive an order to withdraw the statutory demand. When this happens, it’s wise to request the creditor to submit the withdrawal in written format for future reference.

The Risks Involved In Statutory Demands

Statutory demands can be risky to creditors and debtors if handled unprofessionally. If a company sends a demand with defects, the debtor company can request the court to set the statutory demand aside. The debtor may also claim damages if the creditor served the demand wrongly. In this case, you (the creditor) can suffer a significant financial loss that might even be higher than the initial debt.

On the other hand, a company risks being deemed insolvent if it fails to respond to a statutory demand on time. The court may release a winding-up order unless you can prove your business is solvent.


Whether you’re looking to make a statutory demand, or you’re on the receiving end of one and want to understand the best ways to protect yourself, it’s advisable to consult with an experienced commercial lawyer. At Aditum Lawyers we offer a free consultation, if you’d like to speak to one of our lawyers and find out where you stand, then fill in the form on this page or feel free to call us on 1300 234 886.

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Disclaimer: The information provided in this article is for general informational purposes only and should not be construed as legal advice. Consult with a qualified commercial lawyer for personalised advice regarding your specific situation.