Statutory demand: what to do if your company receives one

A statutory demand is one of the most serious letters a New Zealand company can receive. It's a formal demand for payment under the Companies Act 1993, and it starts a clock. Deal with it inside the time limits and the problem can be closed off. Let the clock run out and the creditor can use the unpaid demand to apply to put your company into liquidation.

The good news is that you have options, and 15 working days is enough time to use them if you start straight away. This guide explains what a statutory demand is, the two deadlines that matter, what the law allows you to do, and a day-by-day plan for responding. It also covers how to pay out a demand quickly if the debt is genuinely owed.

What is a statutory demand?

A statutory demand is a written demand from a creditor for a debt a company owes, made under section 289 of the Companies Act 1993. To be valid, the debt must be due and at least the prescribed minimum amount, the demand must be in writing, and it must be served on the company.

The demand requires the company, within 15 working days of the date of service (or a longer period if the court orders), to do one of the following:

• Pay the debt.
• Enter into a compromise with creditors under Part 14 of the Act.
• Otherwise compound with the creditor, meaning reach an agreement the creditor accepts, such as a settlement or payment plan.
• Give a charge over its property to secure payment of the debt.

Statutory demands apply to companies. Sole traders and partnerships face a different process for personal debts, although the practical advice in this guide about acting quickly still applies.

What are the two deadlines you need to know?

There are two separate clocks, and the shorter one catches people out.

Deadline	What it's for	Can it be extended?
10 working days from service	Last day to apply to the court to set the demand aside (section 290)	No
15 working days from service	Last day to pay, compromise, settle or give a charge (section 289)	Only if the court orders a longer period

If you think the debt isn't owed, or not in full, you must act within the first 10 working days. Waiting until day 14 to raise a dispute is too late for a set-aside application.

Working days exclude weekends and public holidays, and holiday periods can affect the count. Ask your lawyer to confirm the exact deadline dates on day one, and write them somewhere you'll see them every day.

What happens if you don't respond?

If the company doesn't comply within the time allowed, the creditor can use the unpaid demand as the basis for an application to the High Court to put the company into liquidation. That application is public, and news of it can spread quickly to your bank, suppliers and customers.

If the company is liquidated, a liquidator takes control, directors lose control of the outcome, and the liquidator's fees are paid ahead of creditors. Our guide to alternatives to liquidation explains what that means in practice and how to avoid it.

A statutory demand is often a creditor's way of saying "talk to us now". Many are resolved by payment or agreement well before the deadline, but only when the company engages early.

Do you owe the debt, or is it disputed?

Your first decision is whether the debt is genuinely owed. The right response is completely different depending on the answer.

If the debt is disputed: Section 290 lets the company apply to the court to set the demand aside. The court may do so where it's satisfied that:

• There is a substantial dispute about whether the debt is owing or due.
• The company has a counterclaim, set-off or cross-demand that brings the net amount below the prescribed minimum.
• The demand ought to be set aside on other grounds.

A demand won't be set aside for a technical defect alone unless substantial injustice would result. The application must be filed within 10 working days of service. This is legal work, so get your lawyer onto it immediately.

If the debt is owed: Your focus is on paying it, agreeing terms with the creditor or securing it within 15 working days. The rest of this guide concentrates on that path.

What should you do, day by day?

Here's a practical timeline for a company that owes the debt and wants to resolve it.

1. Day 1: Confirm the facts. Note the date of service, check the amount against your records and ask your lawyer to confirm the 10- and 15-working-day deadlines.
2. Day 1–2: Contact the creditor. Acknowledge the demand, confirm you're taking it seriously and ask whether they'll accept a payment plan or settlement. Get anything agreed in writing.
3. Day 1–3: Work out your cash position. Can you pay from cash, from a quick asset sale or only with funding?
4. Day 2–4: Start funding early if needed. If you'll need a loan, apply now rather than waiting to see if the creditor agrees to terms. You can always use less.
5. Day 3–8: Pursue the best option. Negotiate a written agreement, finalise funding or arrange security over property.
6. Day 8–12: Complete the payment or agreement. Aim to finish with days to spare, not hours.
7. Before day 15: Get written confirmation. Ask the creditor to confirm in writing that the demand is satisfied or withdrawn.

Keep every email and letter. If there's any later disagreement, a clear paper trail protects you.

What to gather on day one

Having the right paperwork in one place makes every conversation faster, whether it's with your lawyer, the creditor or a lender:

• The demand itself, with a note of exactly how and when it was served.
• Your account history with the creditor: invoices, statements, payments made and any correspondence about disputes.
• Any contract or terms of trade that set out what was agreed.
• A current list of all creditors, so you know whether others are likely to follow.
• Recent bank statements and a short cash forecast, showing what you can pay now.
• Property details if you may use equity: address, estimated value and current mortgage.

When you call the creditor, stay calm and factual. Our guide to talking to creditors and buying time has practical wording for these conversations, and our how it works page shows each step of a fundU application if you'll need funding.

What are your options to resolve the demand?

Option	How it works	When it fits
Pay in full from cash	Pay the demanded amount before the deadline	You have the cash but it was committed elsewhere
Negotiated settlement or payment plan	Agree terms in writing with the creditor	The creditor is open to it and you can meet the plan
Give a charge over property	Secure the debt against company property, as section 289 allows	The creditor accepts security in place of payment now
Pay using a property-secured loan	Borrow against property equity and pay the creditor in full	The debt is owed and you need funds quickly
Formal compromise under Part 14	A proposal to creditors under the Companies Act	Several creditors are pressing and the business is viable
Apply to set aside	Court application within 10 working days	The debt is genuinely disputed

Paying in full is the cleanest outcome. It ends the demand, removes the liquidation risk from that creditor and lets you get back to running the business.

Who issues statutory demands, and why now?

Any creditor can issue a statutory demand, including suppliers, landlords, contractors, finance companies and Inland Revenue. In January 2026, Inland Revenue announced a campaign focused on overdue GST and employer debt, saying it would contact customers and could then visit, make deductions from bank accounts or take other enforcement action, which may include liquidation. It encourages businesses to set up instalment arrangements in myIR before it gets that far.

If your statutory demand relates to tax, the same principle applies: engage early. Our guide to what happens if you ignore IRD debt walks through how IRD enforcement escalates.

How can a property-secured loan pay out a statutory demand?

If the debt is owed and you, your company, your family trust or a supporting party owns property with equity, a property-secured business loan can pay the creditor in full before the deadline. Because the loan is secured against property, a lender can often look past the credit problems that a statutory demand usually signals.

fundU is a direct lender, so our credit team makes its own decisions and can move quickly, with funding in as little as 24 hours once approved in some cases. We can pay the creditor directly at settlement, and the loan can also cover other pressing debts at the same time, such as IRD arrears, so you're not facing the next demand a month later. Our urgent business loans page explains how the process works when time is tight.

What we'll want to know:

• The amount and creditor named in the demand, and the date it was served.
• The property being offered as security and any existing mortgage.
• Other debts that need clearing at the same time.
• Your exit: how the loan will be repaid, for example by refinance, sale or improved trading.

Example scenario

An Auckland civil contracting company was served a statutory demand for $92,000 by a plant hire supplier after a large client paid late. The company also had about $60,000 of overdue GST. The director's first instinct was to call an insolvency practitioner.

Instead, on day two, the director called the supplier to confirm payment was being arranged and applied for funding. The director's investment property was worth about $820,000 with a $360,000 mortgage. A $160,000 second mortgage paid the supplier in full on day nine and cleared the GST. The company kept its plant hire account, kept working and planned to repay the loan from the delayed client payment and a later refinance.

Key takeaways

• A statutory demand gives a company 15 working days from service to pay, settle, compromise or give a charge over property.
• An application to set it aside must be made within 10 working days, with no extension.
• Ignoring a demand can lead to a creditor applying to liquidate the company.
• Confirm your deadlines with your lawyer on day one and contact the creditor early.
• If the debt is owed, a property-secured loan can pay it out in full and quickly.

Resolve the demand before the deadline

If your company has been served a statutory demand and the debt is owed, don't wait until the last few days. fundU lends $20,000 to $1m against New Zealand property to pay out creditors and clear urgent debt, and we consider bad credit and IRD debt case by case. Read about our business rescue finance, then start your enquiry. It takes a couple of minutes and won't affect your credit score. If your deadline is close, call us now on 09 875 4577.