Short answer: A creditor's statutory demand gives a company 21 days from service to pay the debt, or secure or compound it to the creditor's reasonable satisfaction. Any application to set it aside must be made and served inside the same 21 days, and the court cannot extend that. Miss both and on day 22 the company is presumed insolvent.
What is a statutory demand?
A creditor’s statutory demand is a formal demand under the Corporations Act, served on a company, for a debt that is due and payable. Since 1 July 2021 the debt has to be at least $4,000. Before that the minimum was $2,000. It usually arrives after invoices, reminders and a letter of demand have gone unanswered, though some creditors go straight to it.
It isn’t a court order, and nobody has sued you yet. It’s something more dangerous: a short, fixed clock that, if ignored, gives the creditor what it needs to apply to wind up your company. That is how a $6,000 argument with a supplier can end a business that is otherwise trading fine.
The ATO uses statutory demands too (ATO). If yours came from the ATO, read our guide to the director penalty notice as well. The two can arrive in the same season, and each has its own deadline.
The two 21-day clocks
Service starts two deadlines at once, and people mix them up all the time.
- Clock one: comply. Within 21 days after service, the company must pay the amount, or secure or compound the debt to the creditor’s reasonable satisfaction. Securing means giving the creditor security it accepts. Compounding means agreeing a settlement, often for less or over time. Either way the creditor has to be satisfied, so get the agreement in writing.
- Clock two: set aside. If the debt is genuinely disputed, or the company has an offsetting claim against the creditor, it can apply to court to have the demand set aside. That application must be made and served on the creditor within 21 days of service. The court can’t extend that time. A day late is too late.
The second clock is a court application, and it is a lawyer’s job. If you think the debt is wrong, call a commercial litigation lawyer this week, not in week three. The application, the supporting affidavit and service all have to happen inside the window.
The trap is assuming that because you dispute the debt, you can wait. If you don’t apply in time, the company generally can’t later rely on grounds it could have raised in a set-aside application. A dispute you never filed doesn’t help you. The sections are in the Corporations Act (s459E to s459S) if your lawyer wants the references.
What happens on day 22?
If the company hasn’t complied, and no set-aside application is on foot, it is presumed insolvent. The creditor can then apply to the court to wind the company up.
The presumption is the whole point of the demand. The creditor no longer has to prove your company can’t pay its debts. A demand you could have paid with a phone call and a loan becomes a fight about whether the company survives.
From there the cost of saving the company rises sharply, and other creditors, suppliers and your bank are far more likely to notice. Everything in this guide is about not getting to day 22.
Your options, day by day
| Days since service | What to do | Why it matters |
|---|---|---|
| Day 0 to 2 | Check the creditor, the amount and the date it was served. Write down day 21. | Every deadline runs from service. Don’t guess it. |
| Day 1 to 5 | Decide: is the debt owed, or genuinely disputed? | If disputed, see a lawyer now. A set-aside application takes days to prepare. |
| Day 3 to 10 | Talk to the creditor. Offer to pay, give security or agree a settlement. | Any deal must satisfy the creditor. Get it in writing. |
| Day 5 to 14 | If paying, arrange the funding. | Property-secured loans can fund in as little as 24 hours, but signatories and documents take time. |
| Day 21 | Last day to comply, and last day to make and serve a set-aside application. | Don’t plan to land on this day. |
| Day 22 | The company is presumed insolvent. The creditor can apply to wind it up. | Get legal and insolvency advice the same day. |
The one column people skip is the last one on day 1 to 5. Deciding early whether you are paying or fighting is what keeps both options open.
Paying it with a loan: when it makes sense
If the debt is real, the amount is right and the business is sound, paying it is usually the cheapest way out. Most statutory demands are a cash timing problem dressed up as a legal one, and the fix for a timing problem is money on the right day.
- You own property. A property-secured business loan from $20,000 to $5M, assessed on equity and the exit. No financials needed, and ATO debt or defaults are considered. Funded in as little as 24 hours; the median across our book is 36 hours.
- No property, trading six months or more. A cash-flow loan sized to turnover, assessed from business bank statements. Some fund in as little as 2 hours after approval. It suits smaller demands.
- The demand is one of several debts. Pay the demand and roll the rest into one repayment, so the next creditor isn’t three weeks behind this one. See business debt consolidation.
- You’re disputing the debt. A set-aside application costs money too, and a loan for legal costs can fund it.
Our page on urgent business loans explains both lanes, and what to do when you need a business loan urgently sets out the order of steps when the deadline is days away.
Protect the timing. A loan that can fund in 24 hours still needs every director reachable, the property details to hand and the creditor’s exact payout figure. Start the funding conversation by day 10, not day 20.
Four things get you an answer the same day: a copy of the demand and the date it was served, the creditor’s current payout figure in writing, the address and loan balance of any property you own, and the names of everyone who has to sign. If the ATO is the creditor, add a recent statement of account. Tell the lender about the demand in your first sentence, not your last. It changes how the file is handled, not whether it can be done.
When a loan is the wrong answer
Borrowing to pay a statutory demand only works if the business can carry the new loan and the demand is the only fire. If the company has several overdue creditors, a growing ATO balance and no realistic way to repay new debt, a loan just moves the problem from one creditor to another, now secured against your property. That is throwing good money after bad.
In that position, talk to a registered liquidator or a small business restructuring practitioner before day 21, not after. Small Business Restructuring (SBR) is open to companies with total liabilities of no more than $1 million. Directors stay in control while a plan is put to creditors within 20 business days, which can be extended once by up to 10. Creditors vote, and a majority by value of those voting decides. Plan payments must finish within three years. Employee entitlements that are due must be paid, and tax lodgements must be up to date, before the plan is proposed.
It is not a fringe option. ASIC reports 3,388 SBR appointments between July 2022 and December 2024, and about 83% went on to approved plans. A good adviser will tell you plainly whether you need a loan, a plan, or neither.
Sole trader? You'll get a bankruptcy notice instead
Statutory demands are for companies. If you trade in your own name, the equivalent pressure is a bankruptcy notice. It needs a debt from final judgments or orders totalling at least $10,000, and you have 21 days from service to comply (AFSA). Ignore it and the creditor can move toward bankruptcy proceedings.
In June 2026 the government announced a proposal to raise that threshold, reported as $20,000, and to lengthen the response time, reported as 28 days. As at October 2026 it is not law. Work to the current $10,000 and 21 days.
Know your funding options before day 10
If the debt is owed and the business is sound, the quickest way to make a statutory demand go away is to pay it with days to spare. The eligibility check takes 60 seconds, makes no credit enquiry and costs nothing. It tells you which lane fits and how quickly it could fund. Check what you could borrow against the demand, or call 1300 863 711 and tell us the date it was served.
Frequently asked questions
Can I ignore a statutory demand if I think the debt is wrong?
No. A dispute only protects the company if you apply to set the demand aside within 21 days of service. After that, you generally can't rely on grounds you could have raised in that application.
Does paying part of the debt stop the demand?
Not on its own. Unless the creditor agrees to accept security or a settlement, to its reasonable satisfaction, the company still has to deal with the full amount inside 21 days. Get any agreement in writing.
When does the 21 days start?
From the date the demand was served on the company, not the date printed on it. If you're unsure when service happened, work from the earliest possible date.
Will a lender fund a company that has a statutory demand against it?
Yes, and it's a common reason for urgent loans. Property-secured lenders assess the equity and how the loan gets repaid, not the demand itself. Cash-flow lenders look at whether turnover can carry the repayments.
Is a statutory demand the same as being sued?
No. It isn't a court order and no judgment is needed for the creditor to serve one. That's what makes it dangerous: it's a short, fixed clock that can lead straight to a winding-up application.
Does it cost anything to apply?
No. There's no cost to apply or check your eligibility. All costs are set out in writing in your loan offer before you sign anything.
Will checking my eligibility affect my credit score?
No. Our 60-second eligibility check doesn't make a credit enquiry. A credit check is only done later, with your consent, if you decide to proceed.
