Skip to main content

If your company has been served with a Form 509H Creditors Statutory Demand for Payment of Debt, it is important that you get legal advice as soon as possible.

There are strict time limitations which apply to Statutory Demands, so it is vital that you act immediately to avoid serious consequences, including to prevent a winding up application being made against your company.

What is a Statutory Demand?

In Australia, a Statutory Demand is a formal demand for payment of a debt owed by a company.

Pursuant to the Corporations Act 2001 (Cth), a creditor can issue a Statutory Demand if:

  • The debtor in question is a company;
  • The creditor is owed at least $4,000;
  • The debt is due and payable; and
  • There is no genuine dispute about the debt.

What happens once my company has been served?

Once your company has been served with a Statutory Demand, it has 21 days to act.

It is extremely important that you take note of the deadline for action, as courts do not have the power to extend the 21-day time limit.

A company has three options once it has been served:

  1. Pay the debt. If you do not dispute the debt, you can simply pay it. Make sure that payment is made within 21 days of being served;
  2. Negotiate a settlement for the debt with the creditor. If you are able to negotiate a settlement with the creditor, ensure that any agreement reached between you is recorded in writing. This should include a written undertaking from the creditor that the Statutory Demand will be withdrawn. It is important that the negotiations occur within the 21-day time period; or
  3. Make an application to have the Statutory Demand set aside. If you dispute the debt, think the amount is incorrect, or believe there are other grounds to set aside the Statutory Demand, you can make an application to the Court and should do so within 21 days of being served.

What happens if a company fails to comply with a Statutory Demand?

If a company fails to comply with the Statutory Demand within 21 days, or fails to take action in line with the steps above, it will be presumed insolvent.

This means that a creditor can make an application to wind up the company, and such an application can only be resisted in exceptional circumstances.

Once a company is wound up or placed in liquidation, a liquidator will take control of the company.

If your company has been served with a Statutory Demand, it is crucial that you take immediate action and seek legal advice as soon as possible.

Our team is experienced in dealing with Statutory Demands, and has a proven record of negotiating resolutions with creditors and filing successful applications to have the demands set aside. Please do not hesitate in contacting our office for assistance.

Get in touch