21 Days to Decide: How to Respond Urgently to a Creditor's Statutory Demand
Receiving a Creditor's Statutory Demand is a critical threat to your business viability. This formal legal notice requires a company debt of $4,000 or more to be settled within 21 days. Failure to respond correctly leads to the legal presumption that your company is insolvent, opening the door for creditors (including the ATO) to immediately seek liquidation.
The Statutory Demand: A Serious Business Threat
A Statutory Demand (or Stat Demand) is not a standard bill reminder; it is a legally enforceable tool under the Corporations Act 2001. It is a rapid, streamlined process designed to force payment.
If your company fails to pay the debt, negotiate an agreement, or apply to set aside the demand in court within the strict 21-day window, the law presumes your company is insolvent. This presumption allows the creditor to skip lengthy legal steps and file a Winding-Up Application, which forces your business into liquidation.
Three Decisive Options to Defuse the Crisis
When you receive a Statutory Demand, panic is not an option. You must act immediately within the 21 days. Your strategic options are:
Pay the Debt: If the debt is valid and affordable, this is the quickest solution. Legal guidance can ensure the creditor properly withdraws the demand afterward.
Negotiate an Agreement: If immediate full payment is impossible, you can negotiate a structured payment plan or a reduced settlement in exchange for the creditor withdrawing the demand. This requires experienced negotiation with the creditor or the ATO.
Apply to Set Aside: This is done when you believe the debt is inaccurate, the demand was issued incorrectly (e.g., using the wrong form or missing a required affidavit), or you have a counterclaim against the creditor. Setting aside the demand stops the 21-day clock and prevents liquidation, though the underlying debt may still exist.
The Extreme Risks of Inaction
Ignoring a Statutory Demand is the worst possible course of action, initiating a disastrous domino effect:
Presumption of Insolvency: Your company is legally assumed broke.
Winding-Up Petition: The creditor can immediately file for liquidation.
Reversal of Proof: The burden falls entirely on you to prove your company is not insolvent.
Personal Liability: Directors may become personally liable for company tax debts via a Directors Penalty Notice (DPN).
Business Closure: Successful liquidation means losing all control to a liquidator who sells assets, and your business shuts down.
The costs of fighting a winding-up petition often exceed the original debt.
Immediate Action is Non-Negotiable
Due to the non-negotiable 21-day deadline, you cannot afford a delay. You need specialized insolvency lawyers who can:
Check for Defects: Scrutinize the demand for legal errors (e.g., wrong form, affidavit issues) that could invalidate it.
Act Urgently: Prepare and file necessary court applications or negotiate withdrawals within the tight timeframe.
Explore Restructuring: Assess your company’s solvency and suggest financial restructuring or recovery strategies if needed.
A Statutory Demand is a ticking clock. Do not address it alone—seek urgent legal support immediately to protect your company's survival and reputation.
21 Days to Decide: How to Respond Urgently to a Creditor's Statutory Demand
Receiving a Creditor's Statutory Demand is a critical threat to your business viability. This formal legal notice requires a company debt of $4,000 or more to be settled within 21 days. Failure to respond correctly leads to the legal presumption that your company is insolvent, opening the door for creditors (including the ATO) to immediately seek liquidation.
The Statutory Demand: A Serious Business Threat
A Statutory Demand (or Stat Demand) is not a standard bill reminder; it is a legally enforceable tool under the Corporations Act 2001. It is a rapid, streamlined process designed to force payment.
If your company fails to pay the debt, negotiate an agreement, or apply to set aside the demand in court within the strict 21-day window, the law presumes your company is insolvent. This presumption allows the creditor to skip lengthy legal steps and file a Winding-Up Application, which forces your business into liquidation.
Three Decisive Options to Defuse the Crisis
When you receive a Statutory Demand, panic is not an option. You must act immediately within the 21 days. Your strategic options are:
Pay the Debt: If the debt is valid and affordable, this is the quickest solution. Legal guidance can ensure the creditor properly withdraws the demand afterward.
Negotiate an Agreement: If immediate full payment is impossible, you can negotiate a structured payment plan or a reduced settlement in exchange for the creditor withdrawing the demand. This requires experienced negotiation with the creditor or the ATO.
Apply to Set Aside: This is done when you believe the debt is inaccurate, the demand was issued incorrectly (e.g., using the wrong form or missing a required affidavit), or you have a counterclaim against the creditor. Setting aside the demand stops the 21-day clock and prevents liquidation, though the underlying debt may still exist.
The Extreme Risks of Inaction
Ignoring a Statutory Demand is the worst possible course of action, initiating a disastrous domino effect:
Presumption of Insolvency: Your company is legally assumed broke.
Winding-Up Petition: The creditor can immediately file for liquidation.
Reversal of Proof: The burden falls entirely on you to prove your company is not insolvent.
Personal Liability: Directors may become personally liable for company tax debts via a Directors Penalty Notice (DPN).
Business Closure: Successful liquidation means losing all control to a liquidator who sells assets, and your business shuts down.
The costs of fighting a winding-up petition often exceed the original debt.
Immediate Action is Non-Negotiable
Due to the non-negotiable 21-day deadline, you cannot afford a delay. You need specialized insolvency lawyers who can:
Check for Defects: Scrutinize the demand for legal errors (e.g., wrong form, affidavit issues) that could invalidate it.
Act Urgently: Prepare and file necessary court applications or negotiate withdrawals within the tight timeframe.
Explore Restructuring: Assess your company’s solvency and suggest financial restructuring or recovery strategies if needed.
A Statutory Demand is a ticking clock. Do not address it alone—seek urgent legal support immediately to protect your company's survival and reputation.
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