Statutory demand received: your three roads, and the one clock

A statutory demand is the most important letter a company can receive, because it’s the one that leads to a winding-up application. It’s also a letter with one clean advantage: the rules are clear. There’s a single 21-day clock, three possible responses, and a known consequence if you miss it. Owners who understand that early tend to come out the other side still running the business.

What makes a statutory demand different from an ordinary demand?

An ordinary letter of demand is a creditor saying “pay us, or we’ll take this further”. A statutory demand is the “further”. It’s a formal document under the Corporations Act, served on the company, for a debt that is due and payable and totals at least $4,000.

The power of the document is in what happens if you don’t respond. The Federal Court explains that a company that fails to comply within the time allowed is presumed insolvent. The creditor then has three months to rely on that presumption and apply to wind the company up. No other proof of insolvency is needed at that stage; the missed deadline does the work.

What are my three roads?

Road	What it means	When it suits
Pay	Pay the full amount demanded within 21 days	The debt is genuine and funds can be found
Settle	Agree a payment, plan or compromise the creditor accepts in writing, within the 21 days	The creditor would rather be paid than go to court
Set aside	File and serve a court application to set the demand aside, within the 21 days	There’s a genuine dispute, an offsetting claim, or a defect in the demand

The set-aside road is legal work, and the timeline is strict. The Federal Court describes the window for filing and serving the application as the same 21 days. If that’s your path, speak to a lawyer this week, not next.

For most owners we hear from, though, the debt isn’t really in dispute. The money is owed; the business just doesn’t have it this month. That’s where roads one and two, funded properly, come in.

How much time do I really have?

Count from the date of service, not the date you noticed the envelope. If the demand was left at your registered office on a Friday and opened on the Tuesday, four days have already gone.

Use the debt letter triage tool to see the exact calendar date. Then work backwards: a lender needs time to assess, value any property and settle. Every day spent hoping the creditor goes away is a day taken from that process.

If a funded pay-out is realistic for you, the sooner a lending specialist sees the details, the more options stay on the table. Tell us about the demand in about a minute — there’s no credit check to enquire.

How does funding pay out a statutory demand?

The simplest version: a lender advances funds to the company, or to a related party, and the creditor is paid before day 21. The demand is satisfied and the insolvency presumption never arises.

What’s possible depends on what’s available as security:

• Property equity — a second mortgage or caveat loan over residential or commercial property owned by the company, a director or a related entity. Property-secured loans range from $20k to $5m. A caveat loan usually involves less paperwork than a registered mortgage, which is why it’s often considered when a deadline is close; read more on caveat loans for deadlines.
• Cash flow — unsecured or cash-flow funding, typically $5,000 to $500,000, set by the business’s turnover and account history, for trading businesses without property.
• Part-pay plus settlement — where a creditor will accept a reduced lump sum to close the matter, funding the lump sum can be cheaper than paying the face value. We cover that on funding a creditor settlement.

Lenders will want to know why the debt arose and how the new facility will be repaid. A demand from one supplier in a business that’s otherwise trading well is a very different file from one of five demands in a month.

An illustrative example

Illustrative only. A Sydney events company receives a statutory demand from an equipment hire supplier after a large client paid 90 days late. The company owns no property, but the director owns a unit with equity behind the bank’s first mortgage. A caveat loan secured on the unit pays the supplier on day 12. When the late client pays, the caveat loan is repaid early and the unit is clear again.

What if other creditors are circling?

A statutory demand is sometimes the first public sign of trouble, and other creditors can join a winding-up application once one is filed. If you owe several parties, look at the whole picture before you fund just one of them. The which-debt-first sorter puts your pressures in order, and a debt consolidation loan may clear several at once.

If the deadline has already passed and you’ve been served with a court application, read what can still be done after a winding-up application.

Can we help you meet the 21 days?

We work with owners at exactly this point: a real debt, a hard date, and a business worth keeping. The aim is to pay the demand out on time so the company carries on and the conversation with administrators never needs to happen.

Tell us about the demand, the creditor and the business — it takes about 60 seconds. There’s no credit check when you first enquire. One team keeps your details rather than firing them off to every lender in the country. A real person reads your enquiry and rings you, usually with questions about the dates and security. The more accurately you fill in the form, the faster we can tell you whether a pay-out is possible.

Start the conversation before day 21 →