My company has just been served with a creditor’s statutory demand, what does it mean?
Being served with a creditor’s statutory demand can be alarming for any company director. It’s not just another letter of demand – it’s a formal step under the Corporations Act 2001 (Cth) that can have very serious consequences if ignored.
A statutory demand is a written notice from a creditor requiring your company to pay a debt of $4,000 or more within 21 days. The demand must relate to a debt that is due and payable, and it usually includes an affidavit verifying that the debt is owed. Importantly, once served, the clock starts ticking – you have only 21 days to either pay, reach an acceptable settlement, or apply to the Court to have the demand set aside.
If your company fails to respond, the law presumes your company is insolvent. This presumption can be used by the creditor to apply to wind up your company in liquidation. In other words, your business could be forced to shut down.
However, there are circumstances where a statutory demand can be challenged. For example, if there is a genuine dispute about whether the debt is owed, or if there is a defect in the demand that causes substantial injustice, you may be able to apply to the Court to have it set aside. These applications must be made within the 21-day period, so getting urgent legal advice is critical.
Being served with a statutory demand does not automatically mean the end of your company. But it is a warning sign that your creditor is prepared to escalate matters. Acting quickly – whether by negotiating with the creditor, arranging payment, or seeking legal advice to contest the demand – is essential to protecting your company and its future.
Our lawyers handle complex disputes, including insolvency, liquidations, and commercial litigation. Call us to discuss your situation on 1300 150 357.
