A winding-up application has been filed: funding the debt before the hearing

A winding-up application is the step after a statutory demand that went unpaid. The creditor is no longer asking; it is asking a court to put the company into liquidation. Once filed, the application runs on a timetable set by court rules, and it becomes public.

That sounds final, but it is not yet. Until a winding-up order is made, the company is still in the directors’ hands. If the debt is genuinely owed and the business is viable apart from this creditor, money in the right place before the hearing can change the outcome. This page covers the timeline, the funding and the limits.

How long until the hearing?

Look at the originating process for the hearing date. Then work backwards from the date your solicitor needs funds cleared, which should be well before the hearing itself.

Time until the hearing	What is realistic	First move
4 weeks or more	A first or second mortgage over a director’s property, settled with time for your solicitor to act	Brief your solicitor; send us the property and debt details this week
2 to 4 weeks	A second mortgage or caveat over a director’s property	Get the creditor’s full figure including costs; documents in one batch
Under 2 weeks	Smaller amounts, simple security, documents ready now	Solicitor to talk to the creditor’s solicitor about timing
Order already made	A liquidator controls the company	Speak to your solicitor; the options are now very different

Funding is possible within 24–48 hours once documents are in, and $20k–$250k possible the same day where the security is property. The court timetable does not wait for paperwork, so leave a buffer.

What should directors do in the first 48 hours?

• Diary the dates. The hearing date, the date the application was served, and the latest date your solicitor wants funds cleared.
• Brief a solicitor who does insolvency work. The court steps are technical and the timetable is short.
• Get the real number. Ask the creditor’s solicitor for the debt, any interest claimed and costs to date, in writing.
• Tell your accountant. They can judge whether this is one stubborn creditor or a sign of wider insolvency, which changes the advice.
• List what you can offer. Property owned by directors or related entities, with rough worth and what is owing on each.
• Line up the exit. The receipt that will repay a loan: a debtor, a sale, a refinance or a refund.

None of these steps commits you to borrowing. They make every option faster, including settling with the creditor directly.

What happens between filing and the hearing?

The Federal Court’s information sheet on applications based on an unmet statutory demand sets out the steps. Key points for directors:

• Three months to file. The creditor must apply within three months of the date the company failed to comply with the demand.
• Presumed insolvent. The court must presume the company is insolvent unless there is evidence to the contrary.
• Service. The application must be served on the company within 14 days of filing and at least 5 days before the hearing.
• Public notice. Notice must be published on ASIC’s insolvency notices website at least 7 days before the hearing.
• Six months. The application must be determined within 6 months unless the court extends that time.
• The hearing. If it is unopposed and the formal steps are done, the court usually makes the order. The court may also adjourn or dismiss it, and the applying creditor will ordinarily get its costs, usually fixed at the hearing.

State Supreme Courts also hear winding-up applications under their own rules, so confirm the court and its procedure with your solicitor.

Can the company still dispute the debt?

Only within narrow limits. Section 459S of the Corporations Act says that where an application relies on a failure to comply with a statutory demand, the company may not, without the court’s leave, oppose it on a ground it could have relied on to set the demand aside. Leave is only granted if the ground is material to proving the company is solvent.

In plain terms: the time to dispute the debt was during the 21 days after the demand. Our page on responding to a statutory demand covers that earlier stage. At this point, for most companies, paying or settling a debt that is genuinely owed is the realistic path.

Why is a director’s property usually the security?

Section 468 of the Corporations Act makes any disposition of a company’s property after the winding up by the court begins void, unless the court orders otherwise. A lender asked to take security over company assets while an application is pending will want legal comfort that the security is sound if things go badly.

That is why the cleaner structure is usually:

• The borrower is the director (or the company, with the director as guarantor), for the business purpose of paying the company’s debt.
• The security is the director’s own property or another related property, as a first mortgage, second mortgage or caveat.
• Funds go straight to the creditor or its solicitor at settlement, against written confirmation of the amount.

Our page on third-party security explains what offering your own property for a company debt involves. Each case is assessed individually.

How it works: from filing to resolved

1. Brief your solicitor on the application and the hearing date.
2. Get the creditor’s figure: the debt, interest and its costs to date, in writing.
3. Enquire with us: the property, what is owing on it, the amount needed and the exit.
4. Letter of Offer and loan documents, signed with your solicitor.
5. Settlement: funds go to the creditor or its solicitor.
6. Court side: your solicitor deals with having the application dismissed or withdrawn, including any costs orders.

How does this compare with the alternatives?

Option	Can it resolve the application?	Trade-off
Pay from company cash	Yes, if cash exists	Rarely available at this stage
Secured loan against a director’s property	Often	The director’s property is at risk; costs more than a bank loan
Negotiate a settlement with the creditor	Sometimes	Needs funds for the agreed sum and the creditor’s costs
Small business restructuring	For eligible companies, the court must adjourn if continuing is in the company’s interests	Strict eligibility; a practitioner is appointed
Oppose the application	Rarely, given s 459S	Costs, and the presumption of insolvency to overcome

For the restructuring route, see funding a restructuring plan contribution.

Who it suits

• Companies with a genuine debt and a business that can pay its other debts once this one is cleared
• Directors who own residential, commercial or industrial property with equity
• Companies waiting on a known receipt (a large debtor, a property sale, a tax refund) that will repay the loan

When this isn’t the right move

• The company is insolvent across the board. If many creditors are unpaid and losses continue, a loan to pay one creditor does not fix it, and directors have duties to consider. Get accounting and insolvency advice first.
• The debt is genuinely disputed and you have grounds the court will hear. That is a matter for your solicitor.
• There is no exit. Paying the creditor with a short-term loan you cannot repay moves the risk onto your own property.
• A winding-up order has already been made. The company is then under a liquidator’s control.

What it costs (without the guesswork)

Pricing is set on each deal’s security, loan-to-value ratio, term and exit, and we aim for the sharpest price your situation allows. The components:

• Interest for the term, which can be prepaid or capitalised
• A small assessment fee, varying per loan and shown on the Letter of Offer
• Legal and registration costs for the loan
• The creditor’s debt and the costs it claims, which the loan can include

A second mortgage or caveat generally costs more than a first mortgage, because the lender ranks behind an existing loan.

Documents you’ll need

• The originating process and supporting affidavit, with the hearing date
• The statutory demand that preceded it
• The creditor’s written figure for the debt and costs
• Photo ID for the director, the company’s officers and every security owner
• Property details and what is owing on each property offered
• Evidence of the exit, such as aged debtors, a sale contract or a refund notice

How fast can it settle?

Funding is possible within 24–48 hours once documents are in, with no formal valuation required. Most delays come from a missing guarantor signature or a slow payout letter on the security property. Send the application and property details now so the specialist can judge whether the hearing date leaves enough room.

Illustrative example: paying out the petitioning creditor

Illustrative example: a Brisbane fit-out company ignored a statutory demand from a steel supplier while chasing a disputed variation, and the supplier filed a winding-up application. The debt plus the supplier’s costs comes to $165k, and the hearing is in five weeks. The company’s builder client has since agreed the variation and will pay $240k within 60 days. The director owns an investment house worth about $900k with $460k owing. A second mortgage over the house at an illustrative LVR band of 70% gives about $170k of headroom.

Step	Amount
Headroom on the director’s house	$170k
Less prepaid interest for three months (illustrative)	$9k
Less loan costs	$6k
Funds available	$155k

That leaves $10k to find, which the company pays from trading cash. The supplier is paid in week two, and the solicitor deals with the application. The builder’s payment is the exit. This is an illustration, not a client record.

Other urgent situations we fund

• Paying an ATO debt with property equity
• Responding to a liquidator’s preference claim
• When an ATO payment plan has defaulted

In Queensland? Our page for a private lender in Brisbane covers local title detail. The glossary entry on an exit strategy explains what lenders need to see, and our guide to debt and notice deadlines puts every timeframe in one place.

Hearing date set? See if you qualify

Tell us the hearing date, the creditor’s total figure, the property you can offer and what is owing on it, and how the loan will be repaid. Enquiring involves no credit check. It is handled by one direct lender, our lending partner fundU, and read by a specialist who deals with court deadlines often.

Straight answers about the company’s position and the property let us tell you on the first call whether the numbers and the timetable work. Begin the confidential enquiry.