What is a statutory demand?

A statutory demand is a formal written demand for payment of a debt owed by a company to a creditor. A creditor can issue a statutory demand to a company for a debt that is $2,000 or more.


Failure to comply with a statutory demand and pay the debt creates a rebuttable presumption of insolvency. This in turn provides grounds for the creditor to apply to court to wind up the company.

Note: a statutory demand is served at the company’s registered office. It is important to ensure the correct postal address is up to date in the records maintained by the ASIC.

What do I do if I receive a statutory demand?

ACT FAST! Time is of the essence.

Statutory demands impose strict timeframes. Action must be taken within 21 days of being served the notice to avoid the creditor proceeding to wind up your company. Don’t leave it to the 21st day, act before then to ensure sufficient time to respond.

If your company has difficulty paying a genuine debt when it becomes due and payable it is a sign to review the operational and financial position of your business and address any areas of concern.

What are my options?

Within 21 days you need to either:

  1. Pay the debt.
  2. Reach an agreement with the creditor for compromise or repayment of the debt.
  3. Apply to Court to set aside the demand. This can only be done if
  • There is a genuine dispute;
  • The company has an offsetting claim;
  • There is a defect in the demand which will cause substantial injustice unless the demand is set aside; or
  • There is some other reason.

How can I implement a turnaround or restructuring strategy for my business?

If your company has difficulty paying a genuine debt when it becomes due and payable, it may be a sign that your company is insolvent or is likely to become insolvent in the near future.

There are a number of options  which may be available to you to turnaround the business or, as a last resort, wind up the company. These include:

  • Business performance or solvency reviews
  • Safe Harbour
  • Operational and managerial restructuring
  • Business or asset sales
  • Voluntary Administration
  • Liquidation

If you qualify as a small business, there are now simplified debt restructuring and liquidation options targeted specifically towards small businesses to quickly and efficiently restructure or wind down your business.

Seeking professional advice early is key

If your company is having difficulty meeting creditor payments or you have received a statutory demand, Pilot is here to help navigate the options available. Please contact Bradley Hellen, Nigel Markey or your Pilot advisor.


In the works…

The Treasury is now consulting on whether the statutory demand threshold should remain at $2,000 or be permanently increased to some other amount going forward. Watch this space for further updates.