How to respond to a statutory demand in Australia
A Creditor's Statutory Demand for Payment of Debt is a formal demand under section 459E of the Corporations Act 2001 (Cth). A company served with one has only 21 days to either pay the debt, settle, or apply to the court to set the demand aside. Failure to act creates a presumption of insolvency and exposes the company to winding up.
The framework
Statutory demands are governed by Part 5.4, Division 2 (sections 459A-459T) of the Corporations Act 2001 (Cth). Setting aside applications are made to the Federal Court of Australia or the Supreme Court of the relevant state under section 459G.
The process
Diarise the 21-day deadline immediately
The 21-day deadline under section 459G is strict and cannot be extended. The clock starts from the date of service. Calculate the deadline immediately and treat it as the most urgent matter.
Verify proper service
A statutory demand must be served on the company's registered office under section 109X. Improper service may be a basis for setting aside or arguing that the time limit has not started.
Check the form and content of the demand
The demand must be in the prescribed Form 509H, signed, accompanied by an affidavit, specify the debt and amount, and demand payment within 21 days. Defective form or content can support a set-aside application.
Assess whether the debt is genuinely disputed
Section 459H allows the court to set aside the demand if there is a genuine dispute about the existence or amount of the debt, or if there is an offsetting claim equal to or greater than the debt.
Get urgent legal advice
Statutory demands are time-critical and technical. Engage a commercial litigation or insolvency lawyer immediately to assess your options and prepare any set-aside application.
Negotiate or pay within 21 days (if appropriate)
If the debt is not disputed, paying or settling within 21 days avoids the presumption of insolvency. Consider negotiating a payment arrangement or instalment plan.
File and serve a section 459G application (if disputing)
If you are disputing the debt or have an offsetting claim, file an application and supporting affidavit with the Federal Court of Australia or relevant state Supreme Court within 21 days under section 459G. Serve on the creditor.
Attend the application hearing
The court considers whether there is a genuine dispute under section 459H or whether there is "some other reason" to set aside under section 459J (e.g. defective demand or abuse of process).
Outcome of the application
If successful, the court sets aside the demand and may order costs against the creditor. If unsuccessful, the company has a short period to pay the debt or face winding up proceedings.
Avoid winding up proceedings
If you do not pay or successfully set aside the demand, the creditor can rely on the presumption of insolvency under section 459C(2) and apply for winding up under section 459P. Act early to preserve options.
Forms and templates
- Form 509H — Creditor's Statutory Demand
- Application to set aside (Federal Court / Supreme Court)
Common mistakes
- Missing the 21-day deadline (irreparable)
- Filing the set-aside without an affidavit
- Not serving the application on the creditor within time
- Confusing statutory demands with bankruptcy notices
- Ignoring the demand and risking winding up
Get this process right with Quillio
Quillio can help draft the supporting affidavit for a set-aside application, identify defects in the demand under sections 459H and 459J, and prepare urgent commercial correspondence. See /practice-areas/commercial-litigation or start a free trial.
This guide is general information, not legal advice. Statutory demands are time-critical and technically complex. Get specialist insolvency or commercial litigation advice immediately upon service.
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