A formal Corporations Act tool
Governed by strict requirements — the debt must be clear, the amount correct, and service proper.
Explainer
Statutory demands explained: what they are and when to use one
A statutory demand is one of the most powerful tools a commercial creditor has — but it comes with strict procedural requirements and significant consequences if used incorrectly. This page explains how statutory demands work and when they are appropriate.
A statutory demand under section 459E of the Corporations Act 2001 (Cth) is a formal written demand served on a company requiring it to pay a debt within 21 days. If the company fails to comply and cannot satisfy a court that the demand should be set aside, the failure to pay creates a statutory presumption that the company is insolvent — and that presumption can be relied upon to support an application to wind the company up.
This makes the statutory demand one of the most consequential documents in Australian commercial law, and one that must be issued and served with precision.
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The 21-day clock
The debtor has 21 days to pay, negotiate or apply to set the demand aside. That window is critical.
Gateway to winding up
Failure to comply without a valid challenge gives the creditor standing to seek a winding-up order.
Know before you issue
A statutory demand misused can be set aside with costs — understand the requirements first.
Common questions
Frequently asked questions
Can I issue a statutory demand for any unpaid invoice?
No. The debt must be a fixed, undisputed amount owing by a registered company. A demand issued where a genuine dispute about the debt exists risks being set aside by the court, potentially with costs against the creditor.
What happens if the debtor ignores the demand?
After 21 days, the debtor is presumed insolvent for the purposes of the Corporations Act. That presumption can be used to support a winding-up application in the Federal Court or the relevant Supreme Court.
Can a statutory demand be used against individuals or sole traders?
No — statutory demands only apply to companies incorporated under the Corporations Act. Different processes apply to individuals and partnerships.
Do I need a lawyer to issue a statutory demand?
The document must comply strictly with Form 509H under the Corporations Regulations. Given the consequences of procedural error, legal advice before issuing is strongly recommended.
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