Most people arrive at this page holding a document with a deadline on it. A statutory demand gives a company 21 days, and that period cannot be extended by any court. A bankruptcy notice runs on its own timetable. A director penalty notice has a short window in which options still exist, and after it closes some of them do not. Whatever you have received, the date on it is the most important fact about it. Call 1300 286 578.
Key takeaways
- A statutory demand requires a debt of at least $4,000 and gives 21 days to pay, settle or apply to set it aside. That period cannot be extended.
- Ignoring one creates a presumption of insolvency lasting three months, during which the creditor can apply to wind the company up.
- A bankruptcy notice is the individual equivalent and requires a judgment debt of at least $10,000.
- Directors can be personally liable for insolvent trading, under personal guarantees, and under director penalty notices.
- A payment you received can be clawed back as an unfair preference if the payer was insolvent at the time.
We’ve received a statutory demand
Act immediately. Within 21 days of service you must pay, reach a genuine agreement, or apply to set the demand aside. The application and the supporting affidavit must both be filed and served inside that window. A court has no power to extend it — an application on day 22 fails no matter how good the underlying dispute is.
If there is a genuine dispute about the debt, or you have an offsetting claim, the demand can usually be set aside. The threshold for a genuine dispute is deliberately low: you do not have to prove you will win, only that there is a plausible contention requiring investigation.
What if we just don’t respond?
The company becomes presumed insolvent and the creditor can apply to wind it up. In that proceeding you largely lose the ability to argue the debt was disputed. Ignoring a statutory demand converts a debt argument into an insolvency proceeding, which is far more expensive and puts directors’ duties and insolvent trading exposure into play.
Am I personally at risk as a director?
Sometimes. The main exposures are insolvent trading, any personal guarantees you have signed, and director penalty notices for certain tax liabilities. Safe harbour can protect directors who are genuinely pursuing a course reasonably likely to lead to a better outcome than immediate administration or liquidation, but it is conditional and it is not automatic — among other things, it depends on employee entitlements and tax reporting being kept up to date.
A customer who paid us has gone under. Can the liquidator take the money back?
Possibly, as an unfair preference, if the payment was made while the payer was insolvent and it put you in a better position than other unsecured creditors. There are defences — receiving the payment in good faith without reasonable grounds to suspect insolvency, and the running account principle where you continued supplying. Do not simply pay a liquidator’s demand because it arrives on letterhead.
Administration, liquidation, or restructuring?
Voluntary administration is an attempt to produce a better return than immediate winding up, run by an administrator over a short statutory period, and it can end in a deed of company arrangement, a return to the directors, or liquidation. Liquidation winds the company up and realises its assets. Small business restructuring is a separate process available to eligible smaller companies which allows directors to remain in control while a plan is proposed. Which is appropriate depends on whether the business is viable and on the numbers.
We act for creditors too
Recovering from an insolvent debtor, proving in an administration, challenging a liquidator’s decision, and defending preference claims. If you are a creditor facing a company that has gone quiet, the earliest steps usually determine what you recover.
Corporate insolvency and bankruptcy are federal, so we act nationally from our offices on the Gold Coast, in Brisbane, Sydney and Melbourne. Further reading: our guide to statutory demands, statutory demands for creditors, winding up orders, voluntary administration, directors in liquidation, insolvent trading, assets in a bankruptcy dispute and debt recovery.
Insolvency and bankruptcy FAQs
I’ve received a statutory demand. What do I do?
Act immediately. You have 21 days from service to pay, reach a genuine agreement, or apply to set the demand aside. That period cannot be extended by a court — an application filed on day 22 will fail regardless of how strong your underlying dispute is.
What is the minimum debt for a statutory demand?
$4,000. A demand for less than that is invalid.
What happens if I ignore it?
Your company becomes presumed insolvent and the creditor can apply to wind it up. The presumption lasts three months, and in the winding-up proceeding you largely lose the ability to argue that the debt was disputed.
On what grounds can a statutory demand be set aside?
Four: a genuine dispute about the debt, an offsetting claim, a defect in the demand causing substantial injustice, or some other reason. The first two do most of the work, and the threshold for a genuine dispute is deliberately low — you do not have to prove you will win.
What is the difference between voluntary administration and liquidation?
Administration is an attempt to save the business or produce a better return than immediate winding up, run by an administrator for a short statutory period. Liquidation winds the company up and realises its assets. Administration can end in a deed of company arrangement, a return to the directors, or liquidation.
Can I be personally liable for my company’s debts?
Sometimes. The main exposures are insolvent trading, personal guarantees you have signed, and director penalty notices for certain tax liabilities. Safe harbour can protect directors who are genuinely pursuing a better outcome, but it has conditions and it is not automatic.
What is a director penalty notice?
A notice from the ATO that can make a director personally liable for certain company tax debts. Some types can be remitted by acting within the notice period, and others cannot be remitted at all. The response window is short and the options narrow quickly.
A customer who paid me has gone into liquidation. Can the liquidator claw the payment back?
Possibly, as an unfair preference, if the payment was made while the company was insolvent and put you in a better position than other unsecured creditors. There are defences, including good faith and running account arguments.
What is a bankruptcy notice?
The individual equivalent of a statutory demand, under the Bankruptcy Act 1966. It requires a judgment debt of at least $10,000, so you generally need to have sued and won first.
Should I be talking to a lawyer or an insolvency practitioner?
Both, usually, and in that order if there is any dispute about the underlying debt. An insolvency practitioner administers a process. A lawyer’s job first is to work out whether the process should be happening at all.
If you are holding a demand or a notice, send us the date on it first
Most of what can be done in an insolvency matter depends on how much of the window is left. Call 1300 286 578 or get in touch.
Last updated: 2 October 2026
