News - Company No More

Statutory demands - being risk aware  

A statutory demand[1] may arise due to an unresolved or alleged debt and is a risk to the continued existence of a company.[2]   

Australia’s Corporations Act 2001 provides that a company has 21 days to either pay a statutory demand or apply to the courts to have the demand set aside.[3]  If the demand remains unpaid after 21 days and is not set aside, the company is presumed insolvent and an application can be made by the creditor[4] to wind up the company.[5]  

A statutory demand may be set aside for a number of reasons including non-compliance with legislative requirements,[6] a defect[7] in the demand which causes a substantial injustice,[8] a genuine dispute as to the existence of the debt or the amount claimed, and an offsetting debt of an amount equal or greater than the amount claimed.[9]    

Consideration should be given to whether the company is solvent and, where appropriate, advice should be obtained from an accountant. 

Additional considerations include the possible cost consequences of an application to set aside a demand,[10] a resulting application to wind up a company and any opposition to the winding up application.  

In some cases it may be possible to negotiate a settlement resulting in the withdrawal of the statutory demand.    

In all cases a company should obtain timely legal advice from a suitably experienced and competent solicitor.[11]  Directors may wish to obtain additional independent legal advice regarding their duties. 

If you have any questions please contact Solicitor, Kim Cousins, or our Commercial Law Division.


T. (07) 40317 133

E. email/Kim)(                                                   

 This article contains limited general information and is not legal advice.    

[1]Corporations Act 2001 (Cth) s9.

[2] As seen in the recent case of Dual Homes Pty Ltd and Others v Moores Legal Pty Ltd and Another [2016] VSC 86.

[3] Ss 459F and 459G.

[4] S459P. See also s459Q.

[5] S459A.

[6] S459E.

[7] S9.

[8] S459J.

[9] S459H.

[10] S459N.

[11] Dual Homes case is an example of a solicitor’s failure to provide necessary advice, and failure to take appropriate instructions and action.