How to Use a Statutory Demand to Wind Up a Company

How to Use a Statutory Demand

Statutory demands are among the most effective tools available to creditors seeking to enforce unpaid debts against Australian companies.

Codified under Part 5.4 of the Corporations Act 2001 (Cth), a statutory demand is not simply a payment request; it is a legal instrument that, if ignored, can result in the winding up of the company on the basis of insolvency.

Failure to comply with a statutory demand within 21 days creates a rebuttable presumption of insolvency under s 459C(2) of the Corporations Act, laying the foundation for the creditor to apply to the Court to have the company wound up.

Courts take these demands seriously, and strict compliance with procedural requirements is essential.

Our statutory demand lawyers explain in more detail below.

Overview of Part 5.4 of the Corporations Act

Part 5.4 of the Corporations Act governs winding up in insolvency by the Court. It provides creditors with a mechanism to seek the liquidation of debtor companies that fail to pay their debts as and when they fall due.

Notable sections include:

What is a Statutory Demand?

A statutory demand is a formal written demand for payment of a debt, issued by a creditor to a company. It requires the company, within 21 days of service, to either:

• Pay the debt in full.
• Secure or compound the debt to the creditor’s satisfaction; or
• Apply to set the statutory demand aside.

Read our article here – Can You Serve a Statutory Demand by Email in Australia?

Failing that, the company is presumed insolvent, and the creditor may initiate winding-up proceedings.

This is a summary insolvency mechanism, not a debt collection tool per se. It presumes that a solvent company should not leave a debt unpaid.

Eligibility: Who Can Serve a Statutory Demand?

Under s 459E(1), any person owed a debt or multiple debts totalling at least $4,000 that are due and payable can serve a statutory demand.

• The person must be a creditor; and
• The debt must not be contingent or unliquidated; and
• The demand must relate to a debt that is not subject to a genuine dispute or offsetting claim (though this can only be tested in a set aside application under s 459G).

Notably, creditors can include:

• Former employees with unpaid entitlements.
• The Australian Taxation Office (ATO); and/or
• Assignees of debt.

Requirements of a Valid Statutory Demand

Strict formal requirements under the Act and Regulations govern statutory demands. Non-compliance can result in the demand being set aside or deemed invalid.

Form 509H: The Prescribed Format

The demand must be in Form 509H (Corporations Regulations 2001, Sch 2, Form 509H). It must:

• State the total amount of the debt(s).
• Describe the debt(s) clearly.
• Include a supporting affidavit (unless based on a court judgment or order); and
• Nominate a physical address for service in the same State/Territory where the demand is served (s 459E(2)(e)).

In Daewoo Australia Pty Ltd v Suncorp-Metway Ltd (2000) 33 ACSR 481, Austin J noted at [41].

I note that according to s 109U of the Corporations Law, strict compliance with a prescribed form is not required and substantial compliance is sufficient.

The $4,000 Threshold

The “statutory minimum” is defined in section 9 of the Corporations Act. Since July 2021, it has been $4,000.

If the demand is less than this amount, it is invalid. The debt must also be due and payable; future or contingent obligations do not qualify.

The 21-Day Compliance Period

Under section 459F(2)(a), the company must comply within 21 days of being served. Compliance may involve:

• Paying the debt; and/or
• Securing or compounding the debt to the creditor’s reasonable satisfaction; and/or
• Or filing and serving a valid application to set aside the demand under section 459G.

Failure to do so results in a presumption of insolvency under section 459C(2)(a).

The Presumption of Insolvency

Section 459C(2) of the Corporations Act provides:

A company is presumed to be insolvent if, during or after the 3 months ending on the day when the application was made, any of the following events occurred:
… (a) the company failed (as defined by section 459F) to comply with a statutory demand …

This presumption is rebuttable, but it significantly shifts the legal burden onto the company to prove solvency.

Once the presumption is triggered, the creditor need not prove insolvency unless the company actively disproves it.

Practical Effect of the Presumption

When a company fails to comply with a statutory demand:

• The Court must presume the company is insolvent.
• The onus shifts to the company to prove solvency with full, cogent evidence.
• A creditor can then apply to wind up the company under s 459P without needing to prove insolvency afresh.

This makes non-compliance with a statutory demand a key gateway to winding up under Pt 5.4.

Limits of the Presumption of Insolvency

The presumption of insolvency only arises if:

• The statutory demand was validly served; and
• The company failed to comply within the 21 days; and
• The application for winding up was made within 3 months of that failure.

If more than 3 months have passed since the failure to comply, the presumption no longer applies.

Rebutting the Presumption of Insolvency

Common methods used by companies to rebut the presumption include:

• Presenting audited financial statements; and/or
• Showing ongoing trading profits and liquidity; and/or
• Establishing access to external funding, including directors’ loans; and/or
• Demonstrating payment plans or refinancing underway.

However, bald claims, reliance on unaudited data, or unverified assertions have been repeatedly rejected by courts.

Read our article here – Rebutting the Presumption of Insolvency

Proving Insolvency Beyond the Presumption

While failure to comply with a statutory demand allows creditors to invoke the presumption of insolvency, it is not the only method of proving that a company is insolvent.

In many cases, creditors may:

• Miss the 3-month window for invoking the presumption.
• Face a successfully set aside demand; and/or
• Choose not to use a statutory demand at all.

In such cases, they must prove insolvency through direct evidence under the cash flow test in section 95A of the Corporations Act, which says:

(1)  A person is solvent if, and only if, the person is able to pay all the person’s debts, as and when they become due and payable.
(2)  A person who is not solvent is insolvent.

This is known as the cash flow or commercial solvency test, rather than a balance sheet test. It assesses actual liquidity, not theoretical asset value.

Leading Cases: Interpreting s 95A

In ASIC v Plymin [2003] VSC 123, the Court set out 13 indicia of insolvency (The Plymin Indicators), including:

1. Continuing losses.
2. Liquidity ratios below 1.
3. Overdue taxes.
4. Poor relationship with lenders.
5. Inability to borrow further funds.
6. Suppliers requiring cash on delivery.
7. Payments to creditors outside terms.
8. Issuing of postdated or dishonoured cheques.
9. Special deals with creditors.
10. Solicitor letters and court actions.
11. Unreliable or delayed financial reporting.
12. Inability to raise equity.
13. Non-compliance with repayment schedules.

Courts regularly refer to these indicators as supportive evidence in finding insolvency.

In Southern Cross Interiors Pty Ltd and Anor v Deputy Commissioner of Taxation and Ors. [2001] NSWSC 621, the Court emphasised that insolvency must be assessed objectively, based on commercial realities, not mere technical or accounting definitions.  Palmer J said:

Commercial realities will be relevant in considering what resources are available to the company to meet its liabilities as they fall due, whether resources other than cash are realisable by sale or borrowing upon security, and when such realisations are achievable.

In Elliott v ASIC [2004] VSCA 54, the Court noted that the cash flow test considers both:

• Immediate and future obligations; and
• The availability of funds, including informal sources such as directors’ loans or credit lines.

The Victorian Court of Appeal upheld the trial judge’s findings that the Water Wheel companies were insolvent from 14 September 1999 onwards, based on persistent failure to pay creditors within trading terms, growing debts, and lack of liquidity.

Applying the cash flow test, the Court confirmed that insolvency is determined by whether the company can pay its debts as and when they fall due, not merely on the balance sheet.

The Court found that directors could not rely on the theoretical availability of informal funding sources, such as director loans or potential credit, unless such sources were genuinely available and reliable at the relevant time.

The Court rejected the idea that hopeful expectations or unconfirmed negotiations for refinancing or asset sales could justify a conclusion of solvency.

In Alora Davies Developments 104 Pty Ltd v Raphael [2024] NSWSC 547, Justice Black confirmed that while the indicia of insolvency outlined in ASIC v Plymin (2003) remain useful, courts must not apply them mechanically.

Instead, insolvency must be assessed holistically, having regard to “all the circumstances” — including cash flow realities, access to funds (whether formal or informal), timing and context of debts incurred, and the commercial substance of available financing.

The Burden of Proof

A creditor seeking to prove insolvency outside section 459C(2) must:

1. Demonstrate, on the balance of probabilities, that the company is unable to pay its debts as and when they fall due; and
2. Present current, objective, and compelling evidence—ideally with input from qualified external accountants or financial experts.

Acceptable Forms of Evidence

Courts will accept:

• Recent bank statements showing insufficient funds.
• Overdue payment demands.
• Evidence of dishonoured cheques or bounced direct debits.
• Letters from suppliers switching to COD terms.
• Expert accounting testimony on liquidity and financial ratios; and/or
• Financial reports prepared in accordance with accounting standards.

What Won’t Work

• Unaudited financials or internal spreadsheets without verification.
• Bald assertions from directors or internal accountants.
• Claims of solvency unsupported by cash flow projections; and/or
• Outdated or irrelevant financial information.

Responding to a Statutory Demand

When a company receives a statutory demand, it faces a strict 21-day window to take action.

Failing to respond can trigger the presumption of insolvency under section 459C(2), leading to a winding up application.

The primary statutory response is an application to set aside the demand under section 459G of the Corporations Act 2001 (Cth).

This is especially important for construction companies, see here – Statutory Demands in Construction – Complete Guide.

Section 459G – The Right to Apply

Section 459G(1) of the Corporations Act says:

 A company may apply to the Court for an order setting aside a statutory demand served on the company.

The application must be:

• Filed and served within 21 days of the date of service of the demand; and
• Accompanied by a supporting affidavit, stating the grounds for setting aside.

Late applications will be dismissed — the 21-day period is strict and inflexible.  In David Grant & Co Pty Ltd v Westpac Banking Corporation (1995) 184 CLR 265 the Court said at [38]:

If an application for an order setting aside a statutory demand has not been made within 21 days after service of the demand, there is no application under Pt 5.4 before the court.

Grounds for Setting Aside the Demand

A company may apply to set aside a statutory demand under section 459G of the Corporations Act by filing and serving an application and supporting affidavit within 21 days of service.

The primary grounds available to the company include:

1. that there is a genuine dispute about the existence or amount of the debt; and/or
2. that the company has an offsetting claim; and/or
3. that there is a defect in the demand that would cause substantial injustice; and/or
4. some other reason why the demand should be set aside.

These grounds are set out in sections 459H and 459J of the Act.

The courts have interpreted a genuine dispute to mean a “plausible contention requiring investigation,” and not a fanciful or spurious claim.

An offsetting claim must be a genuine claim that the company has against the creditor, which could wholly or partially offset the amount of the demand.

A statutory demand will not be set aside merely because it contains a technical defect or irregularity.

Under section 459J(1)(a), the Court may only intervene where the defect causes substantial injustice to the debtor company.

Minor errors—such as formatting issues or inconsequential misstatements—will generally be overlooked if the demand still conveys its substance clearly.

However, where a defect misleads the recipient, impairs the company’s ability to respond within the 21-day period, or creates genuine uncertainty about the debt or compliance options, the demand may be set aside.

The focus is on the practical effect of the defect, not its mere existence.

Additionally, the phrase “some other reason” in section 459J(1)(b) has been interpreted broadly to include circumstances such as abuse of process, improper purpose, or unconscionable conduct in issuing the demand.

The ground of “some other reason” is intentionally broad and allows the Court to set aside a statutory demand in circumstances that do not fall within a genuine dispute, offsetting claim, or defect causing substantial injustice.

Courts have interpreted this ground flexibly to include situations involving abuse of process, coercive conduct, bad faith, or where the demand is used for an ulterior or improper purpose.

It may also extend to cases where enforcement of the demand would be inequitable, unconscionable, or contrary to the spirit of the insolvency regime.

While this discretion is not unfettered, it ensures that the statutory demand process is not misused in ways that produce injustice or circumvent proper commercial resolution mechanisms.

Read our article here – Setting Aside a Statutory Demand – Complete Guide

Strict Time Limits

Both the application and the affidavit must be filed and served within 21 days — no extensions available.

If a company misses this window, it cannot later raise any of the above objections to the demand. The presumption of insolvency will stand.

Practical Tips for Responding

• Engage solicitors immediately upon receiving the demand; and
• Assess whether the debt is truly disputed, offset, or defective; and
• Act fast — file the application and serve it on the creditor within 21 days; and
• Ensure the affidavit is detailed and legally sound.

Winding Up: Commencing Proceedings

When a company fails to comply with a statutory demand within 21 days, and does not apply to set it aside, the creditor gains a powerful legal advantage: the right to apply to wind up the company in insolvency under section 459P of the Corporations Act.

This process transforms the statutory demand from a simple payment request into a gateway for liquidation proceedings.

Section 459P — Who May Apply?

section 459P(1)(b) of the Corporations Act states:

 (1)  Any one or more of the following may apply to the Court for a company to be wound up in insolvency … (b) a creditor (even if the creditor is a secured creditor or is only a contingent or prospective creditor).

Only a creditor who is owed a debt may make the application, including:

• The original creditor who served the statutory demand;
• An assignee of the debt;
• In some cases, a contingent or prospective creditor.

Timing: The 3-Month Rule

A winding up application relying on the presumption under section 459C(2) must be filed within 3 months of the date of non-compliance with the statutory demand.

If more than three months pass, the creditor must prove insolvency through other evidence.

Applications are filed in the Federal Court of Australia or the State Supreme Court with jurisdiction.

The application must include:

1. An originating process.
2. An affidavit verifying the debt and failure to comply with the statutory demand.
3. The original statutory demand and proof of service.
4. A supporting affidavit addressing solvency (if necessary).

A hearing date will be scheduled—often several weeks or months later.

The Court may refuse to wind up if:

• The company pays the debt after the deadline but before the hearing.
• There is a technical defect or misuse of process.
• The application was made in bad faith or for a collateral purpose.
• There is a pending appeal or dispute that materially affects the debt.

Other Grounds for Winding Up

Apart from s 459C(2), a creditor may also rely on:

• section 461(1)(k) – “just and equitable” ground.
• section 461(1)(h) – insolvency as reported by ASIC.

Where ASIC reports that a company is unable to pay its debts.

Even in cases where the presumption does not apply, the Court can order winding up based on other insolvency indicators.

Court Orders Upon Winding Up

If satisfied, the Court may:

• Make an order appointing a liquidator; or
• Stay or dismiss the application; or
• Grant adjournments if solvency is being contested; or
• Direct the parties to provide further evidence.

Upon winding up, the company’s assets are controlled by the liquidator, who distributes proceeds to creditors under the statutory priority regime in Part 5.6.

Key Tip for Creditors

Prepare thoroughly: A creditor must come to Court with:

• Clear evidence of the debt; and
• The original demand and affidavit of service; and
• Proof that the 21-day period expired; and
• Confirmation that the demand has not been set aside.

“The winding-up process is not a backdoor debt collection tool. It’s a serious insolvency mechanism with permanent consequences.” — G & M Aldridge Pty Ltd v Walsh [2001] HCA 27

Common Pitfalls and Mistakes

Despite the power and efficiency of statutory demands under Part 5.4 of the Corporations Act 2001 (Cth), their success depends heavily on strict compliance with legal requirements.

Both creditors and debtor companies frequently make procedural or strategic errors that can:

• Invalidate the demand.
• Jeopardise a winding up application.
• Lead to cost orders or dismissal.

Below are the most common and costly pitfalls observed in statutory demand litigation.

Mistake 1: Failing to Use the Correct Form 509H

Statutory demands must comply with the prescribed form, namely Form 509H under the Corporations Regulations 2001.

Errors include:

• Omitting essential details (e.g., debt description, amount, ABN).
• Using outdated or modified versions of the form.
• Leaving blank sections.

Mistake 2: Serving the Demand Incorrectly

Service must strictly comply with section 109X of the Corporations Act. Common errors include:

• Serving to the wrong address (e.g., physical vs registered office).
• Leaving the demand with a person not authorised to accept service.
• Posting to a PO Box.

Tip: Always conduct an ASIC company search before service to confirm the current registered office.

Read our article – Can You Serve a Statutory Demand by Email?

Mistake 3: Claiming Less Than the Statutory Minimum ($4,000)

If the total debt claimed is less than $4,000, the demand is invalid and cannot create a presumption of insolvency.

The legal basis for the statutory minimum is defined in section 9 of the Corporations Act, which says:

“statutory minimum” means:
(a)  if an amount greater than $2,000 is prescribed–the prescribed amount; or
(b)  otherwise–$2,000.

So, unless there is a prescribed amount, the minimum is $2,000.00. So, you need to look at the prescribed amount.  In the Corporations Regulations 2001, Regulation 5.4.01AAA says:

(1)  For the purposes of paragraph (a) of the definition of statutory minimum in section   9 of the Act, the amount prescribed is:
(a) in relation to a company that is eligible for temporary restructuring relief–$20,000; and
(b)  otherwise–$4,000.

Mistake 4: Lack of Supporting Affidavit (for Non-Judgment Debts)

If the debt is not supported by a court judgment or order, the statutory demand must be accompanied by a supporting affidavit.

Errors include:

• Omitting the affidavit.
• Failing to serve it with the demand.
• Using an affidavit that is not sworn on the same day as the demand.
• Someone swearing that does not have authority to swear.

Mistake 5: Using a PO Box as the Creditor’s Address

Under s 459E(2)(e), the demand must provide a physical address in the same State or Territory where the demand is served, for service of any setting aside application.

Using a post office box or an address in another jurisdiction renders the demand defective.

However, there is little case law on this point, but now a statutory demand and an application to set aside a statutory demand can be served by email, an email address may be enough here.

Mistake 6: Filing Out-of-Time Set Aside Applications

Companies served with a statutory demand have 21 days from the date of effective service to:

• File the s 459G application; and
• Serve it on the creditor, with a supporting affidavit.

Delays of even one day are fatal.

Mistake 7: Not Properly Verifying the Debt in the Affidavit

Affidavits in support of the demand or winding up application must:

• Be sworn or affirmed.
• Provide direct knowledge of the debt.
• Avoid hearsay or assumptions.

Courts are reluctant to accept generic or template-style affidavits.

Mistake 8: Abuse of Process or Improper Purpose

If a creditor uses a statutory demand as a threat, to pressure payment, or in the context of an ongoing dispute, the Court may find it an abuse of process.

Statutory demands are for undisputed debts, not tactical leverage.

How to Use a Statutory Demand – Best Practices

How to Use a Statutory Demand – Final Remarks

Statutory demands under Part 5.4 of the Corporations Act 2001 (Cth) are among the most powerful tools available to creditors in Australia.

They offer a streamlined, cost-effective method for enforcing payment of undisputed debts, and provide a legal gateway to winding up proceedings through the presumption of insolvency under s 459C(2).

When deployed correctly, a statutory demand can:

• Prompt fast payment from reluctant debtors;
• Demonstrate a creditor’s seriousness;
• Establish a court-recognised insolvency presumption;
• Trigger liquidation where a debtor company cannot pay.

How to Use a Statutory Demand – Key Takeaways

How to Use a Statutory Demand – Professional Recommendations

Creditors should use statutory demands strategically, especially when the debt is large, undisputed, and the debtor shows signs of default.

Always check for technical compliance, and prepare for follow-up action within the 3-month window if payment is not made.

Companies served with a demand must act immediately. Delays, denial, or inaction can result in a winding-up application.

A well-prepared s 459G application filed and served within 21 days is often the only shield.

Legal practitioners must ensure absolute precision in preparing the demand, supporting affidavits, and service. Simple errors can destroy an otherwise valid case.

Statutory demands are not ordinary debt collection tools — they are part of the corporate insolvency framework governed by strict rules.

When used correctly, they are among the most efficient legal mechanisms for recovering unpaid debts and protecting creditor rights.

Failure to understand and apply the statutory framework can be costly, but careful planning, proper legal drafting, and prompt action can ensure that statutory demands remain a cornerstone of commercial enforcement in Australia.

For more details read out article – Statutory Demand – Complete Guide

How to Use a Statutory Demand – Frequently Asked Questions (FAQs)

Navigating statutory demands and winding up procedures can be complex.

Whether you’re a creditor seeking to enforce a debt or a company facing a demand, understanding the key rules, timelines, and legal thresholds is essential.

Below are practical, legally accurate answers to frequently asked questions that arise under Part 5.4 of the Corporations Act 2001 (Cth).

What is a statutory demand under Australian law?

A statutory demand is a formal written request from a creditor requiring a company to pay a debt of $4,000 or more within 21 days. Issued under Part 5.4 of the Corporations Act 2001 (Cth), it is a powerful tool because failure to comply leads to a presumption of insolvency, allowing creditors to apply to wind up the company. Read more here – What is a Creditor’s Statutory Demand?

When can a creditor issue a statutory demand?

A creditor can issue a statutory demand if the debt is due and payable, undisputed, and exceeds $4,000. The creditor must be able to support the demand with either a court judgment or a supporting affidavit and must serve it correctly on the company’s registered office as listed on the ASIC register.

What is the statutory minimum for a demand in 2025?

As of 2025, the statutory minimum under s 9 of the Corporations Act 2001 (Cth), and regulation 5.4.01AAA of the Corporations Regulations – is $4,000. This amount must be owed as a liquidated debt that is due and payable. If the debt is less than $4,000, the statutory demand is invalid and cannot be used to presume insolvency.

What happens if a company ignores a statutory demand?

If a company fails to comply with a statutory demand within 21 days, the company is presumed to be insolvent under s 459C(2). This allows the creditor to apply to the Court for a winding up order, leading to liquidation unless the company successfully rebuts the presumption or sets aside the demand.

How long does a company have to comply with a statutory demand?

A company has exactly 21 calendar days from the date of service of the statutory demand to comply. During this period, the company may pay the debt, reach an agreement, or apply to set aside the demand under s 459G of the Corporations Act. This time limit is strict and cannot be extended.

Can a statutory demand be set aside?

Yes, a company can apply to set aside a statutory demand under s 459G within 21 days of service. Grounds include a genuine dispute, an offsetting claim, a defect causing substantial injustice, or some other reason. Both the application and affidavit must be filed and served on the creditor within 21 days.

What is a genuine dispute under s 459H?

A genuine dispute is a real and arguable disagreement about the existence or amount of the debt. It must have a plausible basis and not be frivolous, illusory, or a mere denial. If a genuine dispute exists, the Court will set aside the statutory demand, as per Eyota Pty Ltd v Hanave Pty Ltd.

What is an offsetting claim in a statutory demand?

An offsetting claim is a legally actionable claim the debtor company has against the creditor, which may partially or fully reduce the debt. If the offset brings the debt below $4,000, the demand can be set aside. The claim must be genuine, supported by evidence, and quantifiable, even if it arises from a separate matter.

Can a creditor use a statutory demand to recover a disputed debt?

No. Statutory demands must only be used for undisputed debts. Issuing a demand for a debt that is the subject of a genuine dispute can lead to the demand being set aside under s 459H(1)(a) and may result in cost orders against the creditor for abuse of process.

What is the consequence of failing to serve a statutory demand correctly?

Incorrect service of a statutory demand may render it invalid, and the 21-day compliance period may never commence. Proper service must comply with s 109X of the Corporations Act, meaning the demand must be delivered to the company’s registered office. Personal service or service by email is generally not sufficient unless authorised.

Can a statutory demand be used against a sole trader or individual?

No. Statutory demands under Part 5.4 of the Corporations Act 2001 (Cth) apply only to companies, not individuals or sole traders. For personal debts, creditors must pursue enforcement under state laws or apply for bankruptcy proceedings via the Bankruptcy Act 1966 (Cth).

What is Form 509H?

Form 509H is the prescribed form for issuing a statutory demand to a company. It must include the creditor’s details, debt amount, a description of the debt, and a physical address for service of any s 459G application. Use of the correct form is essential for the demand’s validity.

What is the presumption of insolvency under s 459C(2)?

If a company fails to comply with a statutory demand within 21 days, s 459C(2) creates a legal presumption that the company is insolvent. The creditor can use this presumption to apply to the Court for the company’s winding up, unless rebutted by compelling evidence of solvency.

Can a creditor file a winding up application after the 21-day period?

Yes, but the winding up application must be filed within 3 months of the company’s failure to comply with the statutory demand to benefit from the presumption of insolvency. After this window, the creditor must prove insolvency through other means, such as cash flow analysis under s 95A.

What evidence is needed to rebut the presumption of insolvency?

To rebut the presumption of insolvency under s 459C(2), the company must provide clear, current, and cogent evidence of solvency. This typically includes audited financial statements, bank records, payment history, and expert accountant testimony. Courts require the “fullest and best evidence” to displace the presumption.

Is there court discretion in winding up applications?

Yes. Even if the presumption of insolvency is established, courts may refuse to wind up a company if it would be unjust, if the company has since paid the debt, or if there is an abuse of process. The Court’s discretion allows consideration of all relevant factors.

What happens after a winding up order is made?

If a company is wound up, a liquidator is appointed to collect, realise, and distribute the company’s assets. The directors lose control, and the company ceases trading unless permitted. Creditors are paid in priority order under Part 5.6, and employees and secured creditors typically rank first.

Can a statutory demand be withdrawn?

Yes. A creditor may withdraw a statutory demand at any time before a winding up application is filed, usually by letter or deed of withdrawal. If a set aside application has already been filed, the creditor may need leave of the Court to withdraw or reach a consent order with the company.

Can multiple debts be included in one statutory demand?

Yes. Under s 459E(1)(a), a statutory demand may relate to two or more debts owed by the company to the creditor, provided the aggregate exceeds $4,000, and all debts are due and payable. Each debt should be clearly described in the demand or in an attached schedule.

What if the company disputes part of the debt?

If only part of the debt is genuinely disputed and the remaining amount falls below $4,000, the statutory demand must be set aside. If the undisputed portion still exceeds $4,000, the demand may remain valid. The company can seek to partially challenge the demand under s 459H(2).