What is a statutory demand?
A statutory demand is a formal demand for payment under section 289 of the Companies Act 1993. It’s a creditor’s way of saying, “Pay this debt, or we’ll ask the court to liquidate your company.” It can be issued for an undisputed debt that’s due, above a small minimum amount set by regulation.
What makes it serious is the consequence of doing nothing. If the company doesn’t comply within the time allowed, it’s presumed unable to pay its debts, and the creditor can apply to the High Court to have it put into liquidation. At that point a liquidator, not you, controls the company.
The timeline, in working days
| Working day | What happens |
|---|---|
| 0 | Demand is served on the company |
| By day 10 | Last day to file and serve an application to set the demand aside, if the debt is genuinely disputed |
| By day 15 | Last day to comply: pay the debt, agree a compromise, or give security |
| Day 16 onward | The creditor can apply to the High Court to liquidate the company |
Working days exclude weekends, public holidays, and the days from 25 December to 2 January. Our statutory demand timeline guide goes through each step in more detail, including what happens after an application is filed.
Your three ways to comply
Under section 289 the company can do one of three things within the 15 working days:
- Pay the amount demanded. The cleanest outcome. The demand falls away.
- Compound with the creditor. Agree a settlement, such as a reduced amount or a payment plan, that the creditor accepts. Get it in writing.
- Give security. Grant the creditor a charge over company property to secure the debt, on terms the creditor accepts.
Funding helps directly with option 1 and indirectly with option 2. A creditor who knows money is being arranged is often more willing to agree terms.
How funding can clear a statutory demand
A property-secured business loan can pay the creditor directly at settlement. Because the lender relies mainly on the property, not on financials, the assessment can move quickly:
- No financials or tax returns needed for the initial assessment
- First or second mortgage, even behind an existing home loan
- $20,000 to $1m, which can cover the demand plus other pressing debts, including IRD
- Funding within 24 hours of approval in some cases
If you don’t have property, an unsecured business loan based on turnover may cover a smaller demand if the business has been trading six months or more.
What to do on day one
- Write down the service date and count 15 working days forward. Also note day 10.
- Read the demand carefully. Who’s the creditor? How much? Is the debt right?
- If it’s disputed, call a lawyer today. The 10 working day limit for setting aside is strict.
- Contact the creditor in writing. Acknowledge the demand, say you’re arranging funds, and ask for a payout figure.
- Start the funding conversation immediately. Start an enquiry or call us on 03 667 4222 and say you’ve been served a statutory demand, with the date.
- Don’t ignore other creditors. One demand can trigger others; a lender can often clear several at once.
What not to do
- Don’t wait until day 12 to start looking for money.
- Don’t assume a phone call with the creditor pauses the clock. It doesn’t unless they formally agree.
- Don’t sign up with anyone offering to “make the demand go away” without understanding exactly what they’re proposing, what it costs, and who controls the company afterwards.
Before you consider liquidation
When a demand lands, some owners are told the simplest thing is to put the company into liquidation themselves. Sometimes that’s right. Often it isn’t, particularly if there’s equity in property and a business worth saving. Read before you talk to a liquidator or insolvency practitioner first, so you understand what each option means for control of your business and for fees before you sign anything.