Creditor's Statutory Demand: What It Means and How To Respond

You have 21 days from the date you receive the demand to respond. This deadline is strict, and the courts grant extensions only in extremely rare cases, so it is critical to act straight away.

A demand is usually served by post to the company’s registered office, and you are generally taken to have received it 4 days after the date it was posted. It can also be served personally on a director, though that is rare. Either way, work out your date of service and count the 21 days from there.

You have three main options within the 21 days:

• Pay the amount owed;
• Negotiate a payment plan or a compromise of the debt with the creditor; or
• Apply to the court to have the demand set aside.

Which option is right depends on whether the debt is genuinely owed, whether the company can pay, and whether there are grounds to challenge the demand. This is where quick advice matters, because the 21 days does not pause while you decide.

If you apply to the court to set the demand aside, you generally need to show one of the following:

• there is a genuine dispute about the existence or amount of the debt;
• the company has an offsetting claim against the creditor;
• there is a defect in the demand that would cause substantial injustice;
• the amount claimed is below the statutory minimum (currently $4,000); or
• there is some other reason the demand should be set aside.

The application must be made and served within the 21 days. This is technical and time-pressured, and it is not a do-it-yourself exercise.

We don’t recommend ignoring one. If the debt is not paid, or the demand set aside, within 21 days of receipt, your company is presumed to be insolvent. That presumption allows the creditor to file a winding-up application to have the company liquidated and effectively closed down.

If a liquidator is appointed, they take control of the company and its assets, and your powers as a director are suspended. In effect, you lose control, and the liquidator seeks to sell any company assets available. This is how many compulsory liquidations begin.

If the debt is real and the company cannot pay it, a statutory demand is often a sign that the company is insolvent, and continuing to trade an insolvent company carries its own serious risks for directors. In that situation the right response may not be the demand at all, but a restructuring or a controlled, protective exit. Getting that assessment quickly is what keeps your options open.

The ATO uses statutory demands as part of its debt-recovery toolkit, and an ATO statutory demand works the same way as any other: 21 days, then a presumption of insolvency and a possible winding-up application. ATO demands often arrive alongside other pressure, such as a Director Penalty Notice or garnishee action, so an ATO statutory demand should be treated as a signal to get advice on the company’s whole position, not just the single debt. If you are facing ATO debt more broadly, see our page on owing money to the ATO.

de Jonge Read® has guided more than 7,500 business owners and directors through financial distress since 2006. If a statutory demand has arrived, we can assess the demand and the company’s position quickly and tell you the realistic options, whether that is to pay, dispute and set aside, restructure, or take a controlled exit, on a fixed-fee, fixed-time basis.

Don’t let the 21 days run down. Call 1300 765 080 or book your free, no-obligation consultation.

This page provides general information only and does not take into account your personal circumstances. It is not legal, financial or tax advice. Please obtain advice tailored to your situation before acting. Last updated: June 2026.