Statutory demand (Corporations Act)
A statutory demand under Corporations Act s.459E forces a company to pay a debt over $4,000 within 21 days. Non-compliance creates a presumption of insolvency.
Ask Chalkline about this →A statutory demand under section 459E of the Corporations Act 2001 (Cth) is a formal written demand that requires a company (not an individual) to pay a debt of $4,000 or more within 21 days of service. If the company does not pay (or apply to set the demand aside) within the 21-day window, a presumption of insolvency arises, and the creditor can then file a winding-up application in the Federal Court of Australia under section 459P (verified 2026-05-16).
Why builders care about statutory demands (both directions):
As the recipient: a builder served with a statutory demand for $4,000+ has 21 calendar days to either:
- Pay the debt in full, or
- Apply to set the demand aside under section 459G on grounds that the debt is disputed, subject to offset, or the demand is defective.
Missing the 21-day window is fatal. The court is strict about the time limit; ignorance of the demand, holidays, illness, or absence are not accepted reasons for late response. A builder served with a statutory demand needs legal advice on day 1 or 2.
As the issuer: a contractor or subcontractor owed money by a builder-company can issue a statutory demand to accelerate payment. The 21-day window concentrates the debtor’s attention more effectively than a debt-collection demand. But issuing one on a disputed debt is an abuse of process and can result in costs awarded against the issuer.
When statutory demand is the right tool:
- The debt is clearly owed (judgment debt, adjudication determination, signed undertaking).
- The debt is over $4,000.
- The debtor is a company (not an individual; for individuals, the equivalent is a bankruptcy notice).
- There is no genuine dispute about the debt.
When it is NOT appropriate:
- Variation disputes where the underlying contract debt is contested.
- Backcharges or set-off claims the debtor genuinely contests.
- Pre-adjudication debts (adjudication determination is the cleaner debt instrument for SOPA disputes).
- Where the debtor is an individual or partnership.
Statutory demand and SOPA: a builder who wins an adjudication determination under the SOP Act and obtains a judgment debt can use the statutory demand as enforcement leverage when the respondent has not paid the adjudication. The combination is a powerful one-two punch on cashflow recovery.
The 21-day clock: counted in calendar days, not business days, from the date of service. Weekends and public holidays count. The clock starts on the day of service.
Common mistakes by the issuer:
- Issuing on a disputed debt; debtor applies to set aside under s.459G and wins costs.
- Defective service (wrong address, wrong company, wrong demand format); demand is set aside.
- Demanding for an amount below $4,000, outside the threshold.
- Issuing to an individual or partnership (wrong instrument; for individuals it is a bankruptcy notice).
Also known as: s.459E demand; corporate statutory demand; Corporations Act demand.
Category: Contracts & commercial.
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Last updated: 2026-05-16. Verified: 2026-05-16. Quarterly review for currency.