Statutory Demand

Eligibility Checklist

Before you prepare and serve a statutory demand, you must check if your debt qualifies. A statutory demand is a serious legal process. You cannot use it for personal debts or small amounts. If you make a mistake with these checks, the debtor can apply to the court to have the demand set aside. This will likely result in an order for you to pay their legal costs. Use this checklist to confirm your eligibility.

1. Is the debtor a company?

A statutory demand only applies to corporate entities. You generally cannot use this form for individuals, sole traders, or partnerships.

You must check the Australian Securities and Investments Commission (ASIC) register to confirm the debtor is a registered proprietary limited (Pty Ltd) or public company. Search the ASIC register using the debtor's Australian Company Number (ACN) or Australian Business Number (ABN).

If the entity is a trust, you must check who the trustee is. If the trustee is a company, you can name the company as the debtor. If the trustee is an individual, you cannot use a statutory demand.

2. Is the debt over the statutory threshold?

The Corporations Act 2001 sets a minimum amount for a statutory demand. As of current regulations, the debt must be at least $4,000. This figure is adjusted periodically by the Australian Securities and Investments Commission (ASIC).

Check the exact wording of the law. The debt must be for a "liquidated sum." This means the amount must be a fixed, specific number of dollars. It must be calculable with certainty.

If you are claiming an estimate for damage to a property, or you are guessing what a reasonable price might be, this is not a liquidated sum. You need an agreed invoice, a judgment debt, or a specific contract price.

3. Is the debt genuinely disputed?

You must believe there is no genuine dispute about the debt. If the debtor has sent you emails claiming they did not receive the goods, arguing the work was defective, or stating they already paid, you likely have a dispute.

If you issue a demand while a genuine dispute exists, the debtor will file an application to set it aside under section 459G of the Corporations Act. The court will look closely at the evidence. If the debtor shows a plausible argument, the court will cancel the demand.

You should only proceed if the debtor has simply ignored your invoices or letters of demand, or has admitted the debt but claims cash flow issues.

4. Is there an offsetting claim?

Does the debtor believe you owe them money? If the debtor has a counterclaim that reduces your total debt below $4,000, you cannot use a statutory demand. You must calculate the net amount of your debt after accounting for any money they might say you owe them. If the net result is less than the threshold, you are not eligible.

If you can confirm the debtor is a company, the debt exceeds $4,000, is a specific liquidated sum, and is not subject to a genuine dispute or offsetting claim, you meet the eligibility requirements.

You must prepare three key documents before serving the demand. If you make a mistake in the paperwork, the debtor can apply to the court to have the demand set aside. This costs you time and money. Under section 459E of the Corporations Act 2001, the demand must strictly follow the prescribed forms.

The first document is the statutory demand. You must use Form 509H as prescribed in the Corporations Regulations 2001. You can find this form on the Federal Court of Australia website or the Australian Securities and Investments Commission (ASIC) website. You must complete every field accurately. The demand must clearly state the amount owed. This is the total debt due and payable. You cannot claim unliquidated damages, meaning you cannot claim a disputed amount for faulty work or undefined costs. The amount must be a fixed, calculable sum of money.

The second document is the verification affidavit. Section 459E(3) of the Corporations Act 2001 requires this affidavit to verify the existence of the debt. You do not need a lawyer to witness this, but you must use a person authorised to take affidavits. This is usually a Justice of the Peace or a solicitor. In the affidavit, you must swear or affirm that the debt is due and payable. You must also state that there is no genuine dispute about the debt. If the debtor has already paid part of the amount, state the exact remaining balance. Deception in this affidavit is a serious offence.

The third package consists of your supporting evidence. This proves the debt exists on paper. Do not attach original documents if you can avoid it. Use certified copies or clear photocopies. Typical evidence for tradespeople and small businesses includes the original unpaid tax invoices, valid purchase orders signed by the company, and statements of account showing the outstanding balance. If you have a contract or written agreement for the work, include the relevant pages. If you have a director's guarantee, attach a copy of that document. Ensure the dates on your invoices match the dates mentioned in the statutory demand. If you have letters or emails where the debtor acknowledges the debt, include these as well. They help prove that the debt is not disputed.

Check all documents three times before you print them. Ensure the company name on the statutory demand matches the exact name registered with ASIC. You must serve the original statutory demand and the affidavit on the company. Keep a full set of copies for your own records. You will need these if the matter goes to court.

The demand must be served on the registered office of the company. You cannot simply deliver it to a trade counter or a work site. You must check the company details on the Australian Securities and Investments Commission (ASIC) register. If the company has no registered office, you may serve it on the principal place of business shown on the register.

Personal Service

Personal service is the safest way to serve a statutory demand. It involves handing the physical documents directly to a specific person at the company's registered office.

Under the Corporations Act 2001, personal service is considered complete when you leave the documents with a person who appears to be over the age of 16 and who is employed at the office. This could be a receptionist, an administrative assistant, or a manager. You must be certain the address is the registered office.

If you attend the registered office and nobody is there to accept the documents, the law allows you to leave the documents in a prominent position at the office. This might mean leaving them in the letterbox or taped securely to the front door. You should take clear photographs of the documents in the letterbox or on the door to prove you did this. This is a strict requirement and failing to follow it exactly may invalidate your demand.

Postal Service

You also have the option to serve the demand by post. Section 109X of the Corporations Act 2001 sets out the specific rules for this method.

To use postal service correctly, you must send the demand by prepaid post to the company's registered office. It is not enough to simply put it in the post box. The law assumes the company receives the demand on the seventh business day after you posted it. This rule applies even if the letter is lost or delayed in the mail. You must rely on this seven-day timeline for your court filings.

If you choose to hand-deliver the documents but do not give them directly to a person, the law treats this delivery the same as postal service. The demand is deemed to be served seven business days after you left it at the registered office. You should mark this date clearly in your diary. If you miscalculate this timeline, the company may successfully apply to the court to have the demand set aside.

You have strictly 21 days to deal with a Statutory Demand. This timeline is set by section 459E of the Corporations Act 2001 and is non-negotiable. Missing this single deadline creates a legal presumption that your company is insolvent. This is the most dangerous aspect of the document.

The clock starts the day after you receive the demand. You must calculate the dates based on when the document was physically served on your company. You can receive it personally, at your registered office, or by leaving it with a person who appears to be over 16 years old and employed at your usual place of business. If the demand arrives by post, the date of service is generally the day it lands in your letterbox, not the date it was mailed.

You stop the clock by taking one of two actions within the 21 days. You can either pay the full amount claimed or apply to the Federal Circuit and Family Court of Australia (or the Federal Court) to have the demand set aside. You must file the application and serve it on the creditor before the 21 days expire. Filing the paperwork on the 21st day is risky, so you should aim to do it sooner.

If you do nothing and the 21 days pass, the creditor gains the right to apply to the court to wind up your company. They do this by filing a winding up application relying on the presumption of insolvency found in section 459C of the Corporations Act. Once that application is filed, your company is placed into liquidation unless you can prove to the court that you are actually solvent. This process moves quickly and is extremely expensive to fight.

Strictly adhering to this timeline protects your right to contest the debt. Once the deadline passes, you lose the opportunity to argue about the invoice or the amount owed in that specific proceeding. The focus shifts from the debt to your company's survival.

If you intend to challenge the demand, you must move immediately. Gathering evidence of a genuine dispute or an offsetting claim takes time. Do not wait until day 20 to contact a lawyer. The safe approach is to assume the 21 days include weekends and public holidays, meaning you must act during business hours well before the final date.

Paying the debt

If the debt is valid and your company has the funds, pay the amount claimed in full. You must pay within 21 days of being served with the demand. It is critical you pay the exact amount stated on the form and do so before the deadline expires.

You should pay directly to the creditor or their solicitor. Ask for a receipt or written confirmation immediately. Once paid, the statutory demand is satisfied. Keep this proof safe. If the creditor tries to take further action later, this evidence proves the debt is settled. If you believe there is a dispute over the amount, do not pay just part of it. Contact a legal professional immediately.

Applying to set aside the demand

If the demand is defective or the amount is wrong, you can apply to the Supreme Court of your state or territory to have it set aside. You must file this application within 21 days of service. This is a strict timeframe under the Corporations Act 2001 (Cth). You cannot ask for an extension.

Under section 459G of the Corporations Act, you can set aside the demand if there is a genuine dispute about the debt (a substantial arguable case), or if you have a genuine offsetting claim. You can also apply if the demand fails to comply with strict formal requirements, such as verifying the debt or missing required details.

Filing an application stops the 21-day clock. The matter then moves to a court hearing. If the court agrees, the demand is cancelled. If you miss the 21-day deadline, you generally lose the right to challenge the demand based on a dispute.

Ignoring the demand

Do not ignore the demand. If 21 days pass and you have not paid or applied to set aside the demand, your company is presumed to be insolvent under section 459C of the Corporations Act. This creates a serious legal problem, regardless of whether the company actually has money in the bank.

This presumption allows the creditor to take the next step without further warning.

Winding up applications

If the 21 days expire and the debt remains unpaid, the creditor may file a winding up application in court. This is a formal request to shut down your company. The court will list the matter for a hearing.

If the winding up order is made, a liquidator is appointed to take control of your company. The liquidator will sell company assets to pay debts, investigate the affairs of the company, and likely close the business. Directors can face personal investigations regarding their conduct. To stop this process after a winding up application is filed, you usually must pay the full debt plus the creditor's legal costs. Act quickly to avoid reaching this stage.