A statutory demand has been served
A creditor's statutory demand under section 459E of the Corporations Act gives a company 21 days from service to pay the debt, to secure or compound it to the creditor's satisfaction, or to apply to the court to set the demand aside. Let all three pass and the company is presumed insolvent. HomeSec funds the payment where that is the right answer — and this page is equally clear about when it is not.
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Almost everything written about statutory demands collapses these into a single deadline. They are not the same, and confusing them is expensive in both directions — it makes people panic when they have options, and it makes people relax when they do not.
- The deadline to apply to set the demand aside is absolute. An application under section 459G must be filed and served within 21 days of service of the demand. The court has no power to extend this one, and the parties cannot agree to extend it either. Filing on day 21 and serving on day 22 is a failure.
- The period to comply can sometimes be extended — but only where a section 459G application has already been made, and only by a court order made before the current period runs out. Once it has expired, no extension is available.
A creditor who tells you not to worry has not, by saying so, extended anything. What they can do is accept an arrangement, and that is a different thing entirely — see below.
Complying with a demand does not have to mean paying it. Securing or compounding the debt — an arrangement the creditor actually accepts — is compliance under the section. It is the creditor's satisfaction that matters, not the reasonableness of your offer, so this only works if they agree. But it costs a phone call, and it is the first thing to attempt. We would rather you fixed this without borrowing.
The 21 days runs from service, and service on a company can be effected by post to the registered office. If the registered office is your accountant's address, or an old one, the clock can be well advanced before the demand reaches you. Check the date of service, not the date it landed on your desk.
What actually counts as complying
Within the 21 days, one of these has to happen:
- Pay the debt in full. The cleanest outcome and the one we fund.
- Secure or compound the debt to the creditor's reasonable satisfaction — an arrangement they actually accept, not one you have proposed.
- Apply to set the demand aside under section 459G. The application and the supporting affidavit must be both filed and served inside the 21 days. Filing on day 21 and serving on day 22 is a failure.
A demand can be set aside where there is a genuine dispute about the debt, where you have an offsetting claim, or where a defect in the demand would cause substantial injustice. If any of those apply, the right move is a solicitor, not a loan. Paying a debt you genuinely dispute in order to beat a deadline is how a bad demand becomes a settled fact. We would rather lose the file than fund that.
What happens if the 21 days passes
Non-compliance creates a presumption of insolvency. That is a legal shortcut for the creditor: they no longer need to prove your company cannot pay its debts — the burden flips to you. Relying on that presumption, they have three months from the end of the 21 days to file an application to wind the company up.
There is a second consequence that is less well known and does more damage. Having let the demand go unanswered, the company generally cannot then oppose the winding up on grounds it could have raised in a set-aside application, unless the court grants leave — and leave is granted sparingly, and only where the ground goes to proving solvency. The argument you were saving for later is frequently the argument you have lost.
Once a winding-up application is filed, the position changes again and it stops being a matter a lender can help with in isolation — the proceeding is public, other creditors can join it, and paying the one who filed does not necessarily end it. At that point your solicitor leads and everything else follows. The short version: the cheapest day to deal with a statutory demand is any day inside the 21, and every day after that is more expensive than the one before it.
The threshold, and why small demands are still serious
A statutory demand can be issued for a debt of $4,000 or more that is due and payable — a threshold that has been $4,000 since 1 July 2021, having previously been $2,000. Business owners routinely underrate a demand because the amount is small. The amount is not the point. A $4,300 demand and a $430,000 demand produce exactly the same presumption of insolvency, and the same three-month window for a winding-up application.
Why this is a caveat file
Two features matter when the deadline is fixed and close. A caveat can be lodged and settled without the first mortgagee's consent, which removes the one step in a second-mortgage settlement that nobody can control. And our assessment does not depend on financials, lodgements or a clean credit file — none of which a company under a statutory demand tends to have to hand.
We lend from $20,000 to $5,000,000 against real property, to 80% of value on residential security and 70% on commercial. Where the demand is inside its last week, say so on the first call.
If the argument is that your company is solvent because funding is available, expect a court to want more than a letter of offer. The question is whether the money is genuinely and realistically available as a matter of commercial reality, which generally means evidence from the lender, not from you. We will provide it where the file is real. Nobody should treat an approval as a substitute for the payment itself.
Pay in a way that is provable and get written confirmation the demand is satisfied and withdrawn. A payment the creditor later says they did not receive, or received late, leaves you arguing about the presumption rather than relying on the payment. Your solicitor should hold the confirmation.
If the demand is one of several, the business is losing money on every job, and the plan is to borrow against the family home to buy a few months — that is the file we decline. A statutory demand from one creditor in an otherwise sound business is a cash-flow problem worth solving. A statutory demand as the first of many is a solvency problem, and it belongs with a registered liquidator or a restructuring practitioner, who can advise on options a lender cannot.
Common questions
Can I get a loan to pay a statutory demand?
Can the 21 days be extended?
The creditor said they would give me more time.
What if I dispute the debt?
Does paying the demand end it?
A fixed deadline you cannot move, and the funding that fits it.
Have the demand in front of you and tell us the date it was served. 1300 93 83 87, Mon–Fri, 8:30am – 5:30pm Melbourne time.
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Reviewed by Jason Brockmuller, Joint Chief Executive