Received a statutory demand? You have 21 days, and the court cannot extend them

A director rang me on a Thursday with a letter his accountant had forwarded that morning. The accountant’s office is the company’s registered office, and the envelope had been sitting in a tray there since it arrived by post. The letter was a creditor’s statutory demand for $38,400. It had been served nineteen days earlier.

He had two days. The work that needed doing, an affidavit setting out why half the invoices were disputed, filed in court and served on the creditor, normally takes a week.

We did it. But most directors who ring me about a statutory demand do not know how little margin they have until I tell them. So here is the whole procedure, from both sides of it.

What a statutory demand actually is

A statutory demand is not a stern letter. It is a step in the insolvency process, created by section 459E of the Corporations Act 2001 (Cth), and it is the most effective debt recovery tool there is against a company that can pay but has chosen not to.

• It can only be served on a company. Not a sole trader, not a partnership, not a trust (although it can be served on a corporate trustee).
• The debt must be due and payable and at least the statutory minimum, which is $4,000. The minimum was $2,000 until the Corporations Regulations raised it on 1 July 2021. Two or more smaller debts can be added together to reach it.
• It must be in writing, in the prescribed form (Form 509H), specify the debt, require payment within the statutory period, and be signed by or for the creditor.
• Unless the debt is a court judgment, it must be accompanied by an affidavit verifying that the debt is due and payable.

It is served on the company’s registered office. Companies register their accountant’s address more often than not, which is why the letter in my example sat in a tray for a fortnight. Service is complete when the demand reaches that address, not when a director reads it.

How the 21 days run

• Day 0The demand is served at the registered office. The clock starts here, not when someone opens the envelope.
• Days 1–21The company must do one of two things: pay, secure or compound the debt to the creditor's reasonable satisfaction; or file an application in court to set the demand aside under section 459G, with a supporting affidavit, and serve both on the creditor. All within the 21 days.
• End of day 21If neither has happened, the company has failed to comply. It is presumed insolvent (section 459C) and the creditor has three months in which to rely on that presumption in a winding-up application.
• Day 22 onwardsToo late. The company cannot apply to set the demand aside, and under section 459S it cannot oppose the winding up on any ground it could have raised in that application without the court's leave, which is rarely given.

The 21 days is the hardest deadline I deal with in commercial practice. The High Court decided in David Grant & Co v Westpac (1995) that the court has no power to extend it, and the Federal Court’s own guidance says the period has been strictly applied and no extensions can be given. An application filed on day 21 and served on day 22 fails. A long weekend does not help you. A creditor who says on the phone that there is no rush does not help you either, unless the withdrawal is in writing.

The three grounds for setting a demand aside

If the company does not owe the money, or does not owe all of it, the answer is an application under section 459G. The grounds are in sections 459H and 459J.

1. A genuine dispute about the debt (section 459H(1)(a)). The company must show a real dispute about whether the debt exists or how much it is. The test the Victorian Court of Appeal applied in Mayfair Land Holdings v Terafortis in December 2025 is whether there is a "plausible contention requiring investigation": more than a bare denial, less than proof. In that case a borrower served with a demand for about $12.3 million on a $10 million loan argued the debt had been renegotiated over messages and meetings. The court found no plausible contention and refused leave to appeal. A dispute needs documents, dates and a reason, not a feeling that the invoice was high.
2. An offsetting claim (section 459H(1)(b)). A genuine counterclaim, set-off or cross-demand the company has against the creditor, even from a different transaction: defective work, an unpaid rebate, a damages claim. The court subtracts the offsetting claim from the admitted debt to reach the "substantiated amount". If that is under $4,000 the demand is set aside; if not, the demand is varied to the substantiated amount and stands. The claim has to be quantified. In Innovative 3D Systems v RH Capital [2026] FCA 939 the Federal Court rejected an offsetting claim because the company asserted it exceeded the debt without putting any figures behind it.
3. A defect causing substantial injustice, or "some other reason" (section 459J). A wrong amount, a missing affidavit or a demand that misstates the creditor can be a defect, but section 459J(2) says a demand is not set aside merely because of a defect; it has to cause substantial injustice. The "some other reason" ground is broader. In the same Innovative 3D Systems case the court set aside two demands totalling about $23 million for that reason: the creditor had served them while litigation over the same loans was already on foot, and it was ordered to pay the companies' costs.

If you are the creditor

I have used statutory demands to recover a large share of the debts this firm has collected for clients, and the reason is simple: a company that can pay, pays, usually inside the 21 days and without a hearing. But the tool only works when the debt is clean.

If the 21 days pass without payment, the winding-up application is a defined sequence, and the Federal Court publishes it. The originating process is filed within the three months, with an ASIC search no more than seven days old, served on the company within 14 days of filing and at least five days before the hearing. ASIC is notified by 10.30 am the next business day. A liquidator’s consent is filed, and notice of the application is published on ASIC’s insolvency notices website at least three days after service and seven days before the hearing. The application must be determined within six months under section 459R.

Most companies pay somewhere between service of the demand and the day before the winding-up hearing, because by then the director understands that the alternative is a liquidator in the office on Monday. The ones that do not pay are usually the ones that could not, which is information worth having early.

What to do on the day a demand arrives

1. Find the date of service and write day 21 on the document. Ask the registered office when the envelope arrived. If it came by post, assume the earliest plausible date, not the latest.
2. Decide, that day, which of three positions you are in. The debt is owed and you can pay: pay it and get written confirmation. The debt is owed and you cannot pay: that is an insolvency conversation, not a statutory demand conversation, and it needs to happen now. The debt is disputed in whole or part: start the affidavit.
3. Collect every document about the dispute. The contract, the invoices, every email in which you complained, and the figures for any offsetting claim.
4. Do not negotiate past day 14 without a written withdrawal. If the creditor is talking, good; but the application is filed and served by day 21 regardless, and withdrawn later if the deal holds.
5. Check your registered office. If it is an address where mail sits, change it with ASIC, or arrange for anything with a court or law firm name on it to be scanned to you the day it arrives.

If you have received a demand, or you are owed money by a company and want to know whether this is the right tool, the first conversation is a free 15-minute call. We will tell you which of the three positions you are in and what has to happen before day 21. Our commercial litigation and debt recovery work covers both sides of this procedure: demands and winding-up applications for creditors, and setting them aside for companies and their directors.