Creditors' Statutory Demands
Insolvency & Bankruptcy
Key Takeaway
A statutory demand is a powerful tool for creditors to recover debts from companies.
A statutory demand is a powerful tool for creditors to recover debts from companies. If the company fails to comply within 21 days, it is presumed insolvent, and the creditor may apply to wind up the company. We advise both creditors issuing demands and companies defending them on their rights and obligations under the Corporations Act 2001.
Statutory demands under section 459E of the Corporations Act must strictly comply with formal requirements. A defect in the demand can be fatal to a winding-up application. For companies receiving a demand, the response time is short, and the consequences of non-compliance are serious. Prompt legal advice is essential in either scenario.
Requirements for a Valid Statutory Demand
A valid statutory demand under the Corporations Act must be in the prescribed form, specify the debt amount (minimum $2,000 for companies), describe the debt with sufficient particularity, be signed by the creditor or their solicitor, and be served on the company at its registered office. The debt must be a liquidated sum that is due and payable and not subject to a genuine dispute. Even minor technical defects can provide grounds to set aside the demand if they cause substantial injustice. We ensure demands we issue are procedurally correct and rigorously review demands received by clients for any defect that could support a set-aside application.
Setting Aside a Statutory Demand
A company served with a statutory demand has 21 days to respond. Options include paying the debt, reaching a payment arrangement with the creditor, or applying to the Court to set aside the demand. Grounds for setting aside include a genuine dispute about the debt (a plausible contention requiring investigation), an offsetting claim (a cross-claim the company has against the creditor), or a defect in the demand causing substantial injustice. The application must be supported by affidavit evidence, and the company must act promptly — delay can prejudice the application.
Consequences of Non-Compliance
If a company does not comply with a statutory demand within 21 days (by paying, reaching an arrangement, or obtaining a set-aside order), the company is presumed insolvent under section 459C(2) of the Corporations Act. The creditor can then apply to wind up the company, and the company bears the burden of rebutting the insolvency presumption. A winding-up order gives control of the company to a liquidator, who investigates the company's affairs and may pursue recoveries. The winding-up application is advertised, and the advertisement alone can cause significant reputational and commercial damage, including freezing of bank accounts and loss of supplier confidence.
Creditors' Statutory Demands FAQs (Queensland Law)
What are s 459E statutory demands under the Corporations Act?
Under this section of the Act, our team helps clients understand their rights. under section 459E of the Corporations Act 2001, a creditor may serve a statutory demand on a company for a debt of at least ,000. The demand must be in the prescribed form, describe the debt with particularity, and be served at the companys registered office.
What is the 21-day compliance period for statutory demands?
At our firm, a company served with a statutory demand has 21 days to comply (by paying the debt or reaching an arrangement), apply to set aside the demand, or face the presumption of insolvency. The 21 days runs from service, not receipt.
What is the genuine dispute threshold for setting aside a demand?
At our firm, a company may apply to set aside a statutory demand if there is a genuine dispute about the debt or an offsetting claim. The dispute must be plausible and require investigation, not merely spurious or hypothetical. The court must be satisfied the dispute is genuine.
How do I set aside a statutory demand?
An application to set aside a statutory demand must be filed within 21 days of service. Our team ensures this deadline is met. Grounds include genuine dispute about the debt or an offsetting claim.
What is the presumption of insolvency from non-compliance?
At our firm, if a company fails to comply with a statutory demand within 21 days, it is presumed insolvent under s 459C(2) of the Corporations Act. The creditor can then apply to wind up the company, and the company bears the burden of rebutting the insolvency presumption.
Creditors' Statutory Demands Services
- Statutory demand preparation and service for creditors
- Statutory demand review and response strategy for companies
- Application to set aside statutory demands
- Genuine dispute and offsetting claims arguments
- Defect in demand applications: formal and substantial defects
- Winding-up application following demand non-compliance
- Winding-up application defence and staying orders
- Costs applications for successful demand set-aside
- Verification of debt and supporting affidavit preparation
- Urgent injunctions to restrain winding-up advertising
- Negotiation and settlement of demand disputes
- Cross-border statutory demands and service outside Australia
Last updated: July 2026
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