Quick answer
Once a statutory demand is served, the company has three weeks — 21 days — either to clear the debt or to ask a court to cancel the demand. Where the debt is genuinely owed and the business is sound but short of cash, a short-term loan secured on property owned by the company or its directors can pay the creditor inside that window, so the company is not presumed insolvent for failing to comply.
Key points
- The 21-day period is strictly applied and the court cannot extend it
- Non-compliance means the company is presumed insolvent and can face a winding-up application
- If the debt is owed and can be repaid later, a secured loan can pay it now
- Disputed debts call for a set-aside application, not a loan
- Funds can be paid straight to the creditor's solicitor at settlement
- Amounts
- $20k – $5m
- Speed
- 24–48 hours possible once documents are in
- Security
- Company or director-owned property
- Enquiry
- No credit check when you first enquire
A statutory demand is one of the bluntest documents a company can receive. It names a debt, it sets a deadline, and it carries a consequence that has nothing to do with how good the business is: miss the deadline and the company is presumed insolvent.
For a company that genuinely owes the money but is waiting on a slow customer, a delayed sale or a refinance, the problem is timing, not solvency. If the company or its directors own property with equity, a short-term secured loan can close that timing gap inside the deadline.
What is a statutory demand and how long do I have?
The Federal Court describes a statutory demand as a creditor’s formal, written request requiring a company to pay a debt. Its information sheet sets out the key rules:
- Minimum debt. The debts must be due and payable and total at least $4,000.
- 21 days. The clock starts on service. By day 21 the company must have paid, reached a deal the creditor accepts, or put a set-aside application before the court.
- No extensions. The court says the compliance period is strictly applied and no extensions can be given.
- The consequence. Miss day 21 and the law treats the company as insolvent unless it can prove otherwise. The creditor then has a three-month window to file for a winding-up order.
The presumption can be rebutted, but doing that in a winding-up hearing is far harder, and far more expensive, than paying a debt you owe.
Pay, set aside or settle: which response fits?
| Your position | Usual response | Where a secured loan fits |
|---|---|---|
| Debt is owed; cash is tied up but coming | Pay within 21 days | A loan pays the creditor now; incoming cash repays the loan |
| Debt is genuinely disputed | Set-aside application within 21 days | Usually not; this is a job for your solicitor |
| You have an offsetting claim against the creditor | Set-aside application within 21 days | Possibly for any undisputed part |
| Creditor will accept a negotiated sum | Written settlement | A loan can fund the agreed lump sum |
Courts can cancel a demand where the amount is really in dispute, where the company holds its own claim against the creditor, or where a flaw in the paperwork would cause real unfairness. Any of those is a solicitor’s job from the first morning, because the court papers face the very same deadline as payment does.
Is borrowing against property the right move?
It is when the company can pay its debts once this one is cleared. ASIC reminds directors that a company is insolvent when it cannot pay its debts when they are due, and that directors have a duty to prevent the company incurring debts while insolvent. Its warning signs include ongoing losses, poor cash flow and overdue tax and super.
So be honest about which side of the line you are on:
- A timing problem. A large debtor is paying in six weeks, a property sale is under contract, a bank refinance is approved but slow. A short-term business loan secured on property bridges the gap, and interest can be prepaid or capitalised so the business keeps its cash for trading.
- A solvency problem. Losses are ongoing and other creditors are queuing. More debt does not fix that. Speak to your accountant or an insolvency adviser first.
If you are unsure, get that advice before you sign anything, including our Letter of Offer.
How is a statutory demand different from an ATO director penalty notice?
| Statutory demand | Director penalty notice | |
|---|---|---|
| Who issues it | Any creditor owed $4,000 or more | The ATO |
| Who is exposed | The company | Directors personally |
| Debts covered | Any due and payable debt | PAYG withholding, GST and super guarantee charge |
| The 21 days | After service on the company | After the notice is posted or left at the director’s ASIC-registered address |
| Ways out | Pay, settle or apply to set aside | Pay in full, appoint an administrator or small business restructuring practitioner, or begin winding up, depending on lodgement timing |
The ATO notes that where PAYG withholding or GST was reported more than three months late, or never reported, full payment of the company’s liability is the only way the penalty can be remitted. Our guide to director penalty notices and property equity covers that side in depth, and paying an ATO debt with property equity covers clearing tax debts.
Can a private loan be arranged inside 21 days?
Yes, with discipline. A typical timetable:
- Days 1–3. Enquire, then send ID, the demand, property details and what is owing on the title.
- Days 3–6. Specialist call, indicative terms, then the Letter of Offer.
- Days 6–12. Loan documents signed with your solicitor, then settlement.
- At settlement. Funds go directly to the creditor or its solicitor, with written confirmation that the demand is satisfied.
Funding is possible within 24–48 hours once documents are in, and smaller property-secured amounts of $20k–$250k are possible the same day. A caveat or fast second mortgage is often the quickest structure. Leave a buffer: the deadline does not move if a document arrives late.
What does a statutory demand payout look like?
Illustrative example: a Perth transport company is served a statutory demand for $185k by a fuel supplier, after its largest customer stretched payment terms. The customer’s overdue invoices total more than the demand and are due within two months. One director owns an investment house worth about $800k with $350k owing to a bank. A $210k second mortgage over the house, guaranteed by the director, settles on day nine. The fuel supplier’s solicitor is paid at settlement and confirms the demand is satisfied. Interest is capitalised, and the loan is repaid in month four when the customer pays.
The exit was a debt already owed to the company, which is why the loan made sense.
What documents does the lender need?
- The statutory demand and any supporting affidavit
- Photo ID for all directors, borrowers and security owners
- Company details (and the trust deed if a trust owns the property; see company or trust-owned property) and, for director-owned security, the owner’s consent to act as security provider (see third-party security)
- The property address and a statement of what is owing on it
- Evidence of the exit: debtor ledger, sale contract, or a bank’s indicative approval
- Your solicitor’s details so settlement can be coordinated with the creditor’s
Facing a deadline now? Tell us the date of service and the amount and a specialist will tell you whether the timetable works.
Key terms
- Statutory demand: a creditor’s formal written demand that a company pay a debt within the statutory period.
- Presumption of insolvency: what the law assumes when a company fails to comply with a demand in time.
- Set-aside application: asking the court to cancel the demand; it has to be filed and served before the three weeks run out.
- Exit: the incoming money that repays the private loan.
Clock running? See if you qualify
There is no credit check when you first enquire, and your details are seen by a real specialist rather than sent to a crowd of lenders. Our lending partner fundU is the direct lender, with no formal valuation required, so time goes into settling rather than waiting on reports.
Tell us the demand amount, the date it was served, the property on offer and what is owing on it. Clear, exact figures let the specialist tell you on the first call whether the timetable works. Start your 60-second enquiry.
Frequently asked questions
We were served a statutory demand nine days ago. Can a loan still settle in time?
Often, yes, if the property details and ID arrive quickly. Funding is possible within 24–48 hours once documents are in. Aim to settle with several days to spare, because the 21-day period cannot be extended by the court.
Can a director use a personal investment property to pay the company's statutory demand?
Yes. A director can offer property they own as security for a loan to the company, usually with a guarantee. Our page on third-party security explains what that involves and who has to sign.
What if we dispute part of the debt?
Call your solicitor the day it arrives. If the amount is truly contested, if the company has a cross-claim against the creditor, or if the demand itself is flawed in a way that would be unfair to enforce, a court application may cancel it — but that application has to be lodged and served inside the same window.
Is a statutory demand the same as an ATO director penalty notice?
No. Any unpaid creditor can serve a statutory demand, and it targets the company itself. A director penalty notice is an ATO tool that puts directors personally on the hook for some unpaid company tax and super. The two share a three-week clock, but what happens next — and your options — are different.
Can we negotiate with the creditor instead of paying in full?
Yes, and many creditors will settle for certainty. Any agreement should be in writing and should deal with the demand expressly. A loan can still fund a negotiated lump sum.
Will the lender refuse because the company is under pressure?
Not automatically. Pressure from creditors is common in short-term lending. What matters most is the equity in the property, a clear exit, and a business that can meet its debts once this one is cleared.
What is the minimum debt for a statutory demand?
The Federal Court's information sheet says the debts in a demand must be due and payable and total at least $4,000.
What if a winding-up application has already been filed?
Contact your solicitor first, because the position changes once proceedings start. A loan may still help resolve the debt, but your solicitor needs to manage the court side.