Statutory Demand: Issue, Service and Response

What a Statutory Demand Does

A company statutory demand starts a process under Part 5.4 of the Corporations Act 2001. Section 459E governs the creditor’s statutory demand, including its form and accompanying affidavit requirements. Sections 459F and 459G address compliance and an application to set the demand aside. The company must pay, or secure or compound the debt to the creditor’s reasonable satisfaction, within the statutory period. Compounding involves an agreed arrangement for dealing with the debt.

The demand is distinct from these other documents:

• An ordinary letter of demand asks for payment without itself starting the statutory-demand insolvency process.
• A bankruptcy notice concerns an individual debtor under bankruptcy law.
• A winding-up order is a court order. Serving a demand does not itself place the company into liquidation.

The Federal Court’s statutory-demand guide explains the consequence of non-compliance: a rebuttable presumption of insolvency in later winding-up proceedings. That consequence does not determine the merits of a disputed invoice.

Verify the Debt Before Preparing the Demand

Establish what the company owes now, why it owes it and when payment became due. The statutory minimum is $4,000 under regulation 5.4.01AAA. Section 459E permits a single qualifying debt or several due debts totalling at least that amount.

Work through the supporting records before copying a ledger balance into the demand:

1. Identify the contracting company and creditor. Match the contract to the invoice issuer and debtor, including any assignment.
2. Establish the payment obligation. Locate the contract term, completed work or other event making the amount payable.
3. Deduct credits and receipts. Match bank entries to remittance advice and the invoice allocation.
4. Read the dispute correspondence. Separate an unpaid amount from a genuine dispute about whether it exists or how much is owed.

A Fictional Debt Reconciliation

Suppose a supplier’s ledger shows $18,000 outstanding across two invoices. The file contains the following records.

Item	Starting amount	Evidence and adjustment	Remaining amount
Invoice A	$12,000	Bank receipt of $5,000, allocated by remittance advice	$7,000
Invoice B	$6,000	Agreed credit note of $1,500	$4,500
Total	$18,000	Receipts and credits total $6,500	$11,500

The reconciled balance is $11,500. Suppose the company also disputes $4,500 for incomplete work and claims $8,000 for rectification. Record the contractual basis and evidence for each issue before deciding whether a demand is appropriate.

The accounting balance alone cannot establish that work was accepted, payment is due or a credit was correctly allocated. A bank receipt proves a movement of money. The contract and remittance evidence explain which obligation it satisfies. Use bank statement reconciliation to connect payments with the underlying records.

For a large statement bundle, FinTrace saves hours of manual review by consolidating transactions into a searchable Excel ledger with source-file references. Your debt schedule can then identify the receipt and its supporting statement page beside each invoice allocation.

Choose and Complete Form 509H

Use the prescribed Form 509H, Creditor’s statutory demand for payment of debt. An informal payment letter or a downloaded Word document with a similar title does not establish compliance with the prescribed form.

Match the company’s legal name and Australian Company Number to an Australian Securities and Investments Commission (ASIC) search. Complete the creditor’s name and address, the debt schedule and the amount. Describe each debt sufficiently to identify it. For a judgment debt, include the court and order details requested by the form.

Complete the demand’s signature and capacity fields. Preserve its statutory response wording and complete the creditor’s address for service in the state or territory where the demand is served.

Unless every debt is a judgment debt, section 459E(3) requires an accompanying affidavit verifying that the amount is due and payable. Court rules prescribe Form 7 for that affidavit. The statutory demand affidavit guide covers its preparation and execution. Form 509H is the demand itself, while Form 7 is the accompanying affidavit.

Before service, compare the final demand schedule with the reconciled balance. Confirm that any required affidavit accompanies the same version of the demand.

Serve the Demand and Preserve the Record

Section 109X allows service by leaving the documents at, or posting them to, the company’s registered office. Another route is personal delivery to a director residing in Australia or an external territory. The provision also contains routes involving an appointed external administrator. Use the Act’s service provisions for the company’s actual circumstances.

A process server can carry out physical service. Section 109X does not reserve that task to a solicitor or court officer. If you use a staff member, establish that person’s ability to give direct evidence of delivery. Any licensing obligations for a commercial process server also require attention in the relevant state.

Give the server the complete demand and accompanying affidavit, where required. Preserve a service record containing:

• The exact document versions and every enclosure.
• The registered-office search or evidence identifying the director.
• The address, delivery method and person receiving the documents, where applicable.
• The delivery date and time, server’s observations and supporting postal or delivery records.

For postal service, distinguish posting from the legally effective service event. A dispatch receipt alone does not establish that both occurred together. An email exchange also requires its own lawful basis for service. Do not assume that ordinary business correspondence proves valid service of the demand.

Calculate the deadline only after establishing service. Section 105 excludes the service day when counting the period and addresses a final day that is not a business day. For example, after ten complete days have elapsed from established service, eleven days remain in the ordinary 21-day period. Apply the business-day rule in the place where each required act must occur, and allow time for both filing and service.

Respond to a Demand Before Time Expires

On receipt, establish the legal service event and work backwards from the deadline. The 21-day period is a statutory deadline. Negotiation alone does not meet the court filing and service requirements for a challenge.

1. Preserve the complete demand, its affidavit and the delivery evidence. Compare the service claimed by the creditor with the company’s records.
2. Obtain instructions on each debt. Reconcile payments and credits, and ask for the documents supporting any dispute or offsetting claim.
3. Assess resolution. Consider payment or an arrangement securing or compounding the amount to the creditor’s reasonable satisfaction. Record the agreed outcome in writing.
4. Prepare any set-aside application in parallel where grounds exist. Do not let settlement discussions consume the time needed to file and serve it.

The Australian Taxation Office’s debt guidance confirms that it can issue a company statutory demand and pursue winding up after non-compliance. An ATO company demand concerns the company’s debt. Identify the actual notice and debtor before treating it as a director’s personal-liability notice. A tax objection alone does not replace the required response to a statutory demand.

Ignoring the demand leaves the company exposed to the insolvency presumption. If the company cannot meet its debts, obtain insolvency advice alongside the immediate demand response.

Apply to Set Aside a Disputed Demand

A set-aside application needs a supported ground. Under section 459H, the court considers a genuine dispute about the existence or amount of the debt, or a genuine offsetting claim. An offsetting claim can arise from a separate transaction.

The court calculates the substantiated amount after dealing with the dispute and offsetting claim. If that amount is below the statutory minimum, the court must set the demand aside. If it remains at least the minimum, the court can vary the demand. Under section 459J, other grounds include a defect causing substantial injustice or another reason for setting it aside. A defect alone is insufficient.

Build the evidence around the particular ground. A bare assertion that the debt is disputed gives the court no factual account to assess.

Proposed ground	Records to assemble	What the evidence must explain
Debt never arose	Contract, instructions and completion records	Why the contractual payment obligation did not arise
Amount is wrong	Invoices, credits and bank receipts	Which amount is disputed and how the corrected balance is calculated
Offsetting claim	Loss calculation, rectification invoices and communications	The facts supporting the claim against this creditor and its amount
Defect or other reason	Served documents and relevant correspondence	The identified defect and resulting substantial injustice, or the other ground relied upon

File and Serve Within the Statutory Period

Apply in a court with corporations jurisdiction, ordinarily the Federal Court or the relevant state Supreme Court. Prepare the originating process and supporting affidavit together. File the application and affidavit, then serve copies on the person who served the demand, within the statutory period. Section 459G requires all of these steps.

The Federal Court’s corporations practice guide identifies Form 2 originating process and a supporting Form 59 affidavit, lodged through eLodgment. Use the court’s corporations forms, including the correct originating-process form. The demand’s accompanying Form 7 is a different document from the affidavit supporting the company’s challenge.

Check the selected court’s own rules for the company search, document format and service method. The following state requirements need separate attention.

• In NSW, use the Supreme Court (Corporations) Rules 1999 and Practice Note SC Eq 4. Statutory-demand cases enter the Corporations Registrar’s List. Explain the disputed debt basis or the precise facts and calculation supporting the offsetting claim.
• In Victoria, use the Supreme Court (Corporations) Rules 2023. The Corporations List guidance lists Form 2, a copy of the demand, a supporting affidavit and an ASIC search extracted within seven days before filing. The court’s statutory-demand notice also requires service of the notice with the application and provides for court-ordered timetabling.
• In Queensland, use the corporations procedure in Schedule 1A of the Uniform Civil Procedure Rules 1999. Select the corporations documents from Queensland Courts’ forms, and check the Supreme Court’s filing, listing and service requirements for the application. A general civil claim form is not a substitute for selecting the corporations process.

Retain the filing receipt, filed documents and proof of timely service together. A competent section 459G application changes the compliance period under section 459F. A late application cannot be rescued by treating settlement discussions as extra statutory time.

Costs and the Next Insolvency Step

The cost of issuing a statutory demand depends on the work required. Separate the solicitor’s debt review and drafting fees from company-search charges and process-server or postal costs. A contested set-aside application adds court filing fees, affidavit preparation and hearing work. A later winding-up application is another proceeding with its own costs.

Ask for a quote that identifies the work included, disbursements and GST treatment. A simple judgment-debt demand requires different preparation from a disputed contract file with several payment allocations. There is no single universal statutory-demand fee. If the company succeeds in setting the demand aside, section 459N permits a costs order against the person who served it.

Before relying on non-compliance, confirm that the demand remains effective, service is proved and the applicable compliance period has ended. Check for a set-aside application or order, subsequent payments and the debt still outstanding. The insolvency presumption is rebuttable and ordinarily supports an application made within three months of non-compliance.

The creditor must then complete a separate winding-up application and its procedural requirements. Follow the liquidation process for that next stage. Close the demand-stage review with a reconciled balance and a service chronology that supports the precise step your client intends to take.