Statutory Demand Lawyers in Melbourne

Twenty-one days, and no court can extend them

If a statutory demand has landed on your company’s registered office, the 21-day clock started running the day it was served, weekends included. If you are a creditor thinking about serving one, that same unforgiving clock is precisely why the tool works. Either way, this is not a document to sit with for a week.

A statutory demand under the Corporations Act is a formal demand on a company for a debt of $4,000 or more that is due, payable and not genuinely disputed. The company has 21 days to pay, strike a deal, or apply to court to set the demand aside. If it does none of those things, the law presumes it is insolvent and the creditor can apply to wind it up.

Whichever side of the demand you are on, call MK Law on 1800 130 120 today. The first call is free, and we will tell you on that call what the realistic play is.

If you have been served

You have three options and they are all time-limited.

The first is to pay the debt, or negotiate terms the creditor will accept in writing. This is the right answer more often than directors like, because a winding-up application costs far more than most demands.

The second is to apply to court to set the demand aside. That needs a genuine dispute about the debt, an offsetting claim that drags the amount below $4,000, or a defect in the demand that causes substantial injustice. The application and its supporting affidavit have to be filed and served within the 21 days. The High Court has confirmed that no court can extend the deadline, which means a strong set-aside case is worth no more on day 22 than an ignored demand.

The third is to do nothing, which hands the creditor a presumption that your company is insolvent. A winding-up application follows, your bank and trade creditors find out, and directors who keep trading start accruing personal exposure for insolvent trading.

Directors whose company simply cannot pay sometimes reach past all three and hand the business to an external administrator instead. Voluntary administration is a serious step with consequences of its own, and it is a decision to make inside the 21 days rather than in the wreckage afterwards.

Working out which of these applies to you takes one phone call. If the debt is owed and the company can pay, we negotiate time. If the debt is disputed, we get the set-aside application moving immediately, because the affidavit takes longer to prepare properly than most directors expect.

If you are the creditor: the strongest letter you can send a company

For an undisputed company debt of $4,000 or more, nothing concentrates a debtor’s mind like a statutory demand. It replaces the argument about whether they will pay with a countdown to a winding-up application. Debtor companies that ignored months of invoices and a letter of demand routinely pay inside the 21 days. The tool works on companies only. If your debtor is a person rather than a company, the comparable pressure comes from a bankruptcy notice, and the road it opens is bankruptcy rather than winding up.

That power comes with strict rules. The demand has to be in the prescribed form, state the debt precisely, and come with a sworn affidavit verifying the debt where there is no judgment. Serve a defective demand, or serve one over a debt the company genuinely disputes, and you can end up paying the debtor’s costs of setting it aside. We test the debt first, draft the demand and affidavit properly, and serve at the registered office so the clock starts cleanly. Most demands we serve are resolved without anyone filing a winding-up application.

If the company still does not pay, the presumption of insolvency opens the door to winding-up proceedings, where our insolvency lawyers take the file through to liquidation if it comes to that.

Get an answer today, not on day 19

With statutory demands, whoever moves first tends to control the outcome. Call 1800 130 120 or use the form on this page and a lawyer will look at the demand, or at the debt you want to demand, on a free first call. For where this step sits in the wider recovery ladder, see our debt recovery lawyers page or the step-by-step debt recovery process guide.