For many businesses, receiving a creditor’s statutory demand for payment of debt can be alarming. A statutory demand is not just another bill—it is a powerful legal document that can have serious consequences if ignored.

If a company fails to respond within the strict timeframe, it may be presumed insolvent and face winding up proceedings.

Fortunately, companies have options to apply to set aside a statutory demand if there are valid grounds to challenge it. At Rose Litigation Lawyers, we regularly act for companies in these situations, guiding them through urgent applications to protect their position.

What is a Statutory Demand?

A statutory demand is a notice issued under section 459E of the Corporations Act 2001 (Cth) by a creditor, requiring a company to pay an outstanding debt of at least $4,000 within 21 days.

The demand is a precursor to insolvency proceedings. If a company does not comply by paying the debt, reaching an agreement, or successfully setting aside the demand, it is presumed to be insolvent. This presumption allows the creditor to apply to wind up the company.

Timeframes are Critical

The most important thing to know about statutory demands is the strict 21-day deadline. The 21 days run from the date the demand is served on the company.

Within that period, the company must either:

• • Pay the debt in full,
  • Secure or compound the debt to the creditor’s satisfaction, or
  • File and serve an application to set aside the demand.

There are no extensions of time. Missing the deadline can severely restrict your options and expose your company to liquidation proceedings.

Grounds for Setting Aside a Statutory Demand

 The courts will only set aside a statutory demand if specific legal grounds exist. Common grounds include:

• Genuine dispute – There is a real dispute about the existence or amount of the debt (for example, disputes over the quality of work, invoices not yet due, or incorrect charges).
• Offsetting claim – The company has a genuine counterclaim, set-off, or cross-demand against the creditor, which reduces or extinguishes the debt.
• Defects causing substantial injustice – The demand contains defects (such as misdescriptions of the debtor or debt) that would cause serious unfairness if not corrected.
• Other reasons – The court may set aside a demand if there are other sufficient reasons, such as abuse of process.

It is not enough to simply assert a dispute—the company must show evidence to demonstrate the dispute or offsetting claim is genuine.

If a statutory demand is ignored:

• The company is presumed insolvent.
• The creditor may apply to the Court for a winding up order.
• Liquidation proceedings can begin, potentially resulting in the company’s assets being sold, business operations ceasing, and directors losing control of the company.

How Rose Litigation Lawyers Can Help

We understand the urgency and high stakes involved in statutory demand matters. Our team assists clients by:

Urgent Advice – We act quickly to review the statutory demand, advise on its validity, and identify any grounds to set it aside.

Preparing and Filing Applications – We draft and file the necessary court documents to apply to set aside the demand, ensuring compliance with strict deadlines and procedural rules.

Evidence Gathering – We assist in preparing affidavits and supporting material to demonstrate the genuine dispute, offsetting claim, or defect.

Court Representation – We represent your company in court, arguing the case for the demand to be set aside and protecting your interests against creditors seeking to wind up your business.

Negotiating with Creditors – Where appropriate, we engage with creditors to resolve disputes commercially, avoiding unnecessary litigation and preserving business relationships.

Why Choose Rose Litigation Lawyers?

Specialist insolvency expertise – We are trusted advisers to insolvency practitioners and company directors, with deep knowledge of the Corporations Act and court procedures.

Commercial approach – We provide clear, practical strategies tailored to your company’s circumstances.

Proven results – Our team has a strong track record of successfully setting aside statutory demands and protecting companies from winding up proceedings.

If your company has been served with a statutory demand, time is of the essence. Our experienced litigation and insolvency lawyers can act immediately to protect your business and advise you on the best strategy.

The content of this publication is intended to provide a summary and commentary only. It is not intended to be comprehensive, nor does it constitute legal advice and has been prepared based on applicable legislation and case authority at the date of publication. You should seek legal advice on specific circumstances before taking any action.