In most cases, yes, SBR can help after a statutory demand. A statutory demand does not, on its own, disqualify a company from Small Business Restructuring. However, once a winding-up order is made, SBR is no longer available. Directors are advised to seek advice early.
Free Download: SBR Eligibility Checklist
On This Page
- Introduction
- What A Statutory Demand Does
- Does A Statutory Demand Affect SBR Eligibility?
- What If a Winding-Up Application Has Already Been Filed?
- Does Appointing A Practitioner Stop The Statutory Demand Or Court Process?
- Other Options Worth Considering
- Why Acting Early Matters
- Next Steps
- FAQs
Introduction
Running a company can be challenging, especially once a creditor takes formal steps to recover a debt. A statutory demand is one of the more serious of these steps, but receiving one doesn’t automatically rule out Small Business Restructuring (SBR) as an option.
This article sets out what the law says about SBR eligibility after a statutory demand, what happens if a winding-up application follows, and where the actual cut-off point sits.
What a Statutory Demand Does
A statutory demand gives a company 21 days to respond. Within that time, the company can:
- Pay the debt
- Negotiate with the creditor
- Apply to the court to have the demand set aside
If none of these happen within 21 days, the law presumes the company is insolvent. That presumption is what allows a creditor to apply to the court to wind the company up.
Read more: ATO Statutory Demand Explained: Timelines, Risks, What to do next
Does a Statutory Demand Affect SBR Eligibility?
No. Eligibility for SBR is set out in section 453C of the Corporations Act and regulation 5.3B.03, and is based on:
- Total liabilities under $1 million, including tax debts and the unsecured portion of secured debts
- No prior use of restructuring or simplified liquidation by the company, or by any of its directors, in the past seven years
A statutory demand isn’t part of this test. Receiving one doesn’t, by itself, change whether a company qualifies.
What If a Winding-Up Application Has Already Been Filed?
The eligibility question doesn’t turn on the statutory demand alone — it also depends on what stage any court process has reached.
What is allowed
Even after a winding-up application has been filed in court, a company can still appoint an SBR practitioner.
Once restructuring begins, the court is required to adjourn the winding-up hearing — and must not appoint a provisional liquidator — if it’s satisfied that continuing under restructuring is in the interests of creditors, rather than winding the company up.
Where restrictions arise
Courts do apply more caution where an appointment is made after the winding-up proceeding has already commenced, particularly if the adjournment request comes on short notice. Delay on its own isn’t necessarily enough to defeat an adjournment. When deciding, the court looks at:
- Whether the restructuring is likely to serve creditors better than winding up would
- Creditors’ own right to vote on the restructuring proposal, rather than having that choice taken away from them
The real cut-off point is whether a winding-up order has been made. Once a court makes a winding-up order and a liquidator is formally appointed, the company is under external administration, and SBR is no longer available.
In practical terms:
- Application filed, no order made — SBR is still an available option, though the appointment will attract more scrutiny the later it happens
- Order made, liquidator appointed — SBR is no longer available
Does Appointing a Practitioner Stop the Statutory Demand?
Not on its own.
Appointing an SBR practitioner brings a moratorium, which stops unsecured creditors from starting or continuing recovery action. But it doesn’t automatically make an existing statutory demand or winding-up application go away.
Removing those still depends on:
- The adjournment process described above
- The court being satisfied it’s in creditors’ interests to continue the restructuring
Before a restructuring plan can be put to creditors, the company’s tax lodgements and employee entitlements need to be up to date. Here’s how this fits in:
- It’s a condition of the plan proceeding — not a condition of appointing a practitioner
- A company can appoint a practitioner while lodgements are still being brought up to date
- The plan itself, though, can’t go to creditors until lodgements and entitlements are resolved.
Other Options Worth Considering
SBR is one of several pathways available once a statutory demand has been issued. Depending on a company’s circumstances, it may also be worth considering:
- Voluntary administration — a different framework, with its own moratorium and control arrangements. See: Voluntary Administration vs Small Business Restructuring: Which Option Is Better for Your Company?
- Liquidation — appropriate where the business is no longer viable to continue trading. See: Small Business Restructuring vs Liquidation
- Direct negotiation with the creditor — sometimes the quickest resolution, particularly where the debt is disputed or can be settled
A restructuring practitioner can help assess which option fits a company’s specific position.
Why Acting Early Matters
SBR remains available even after a winding-up application is filed, but waiting narrows the options:
- Earlier appointments face less court scrutiny
- The practitioner has more time to prepare a solid plan
- There’s more room to sort out lodgements before they become urgent
Next Steps
If your company has received a statutory demand, or a winding-up application has followed, as a director you should:
- Check eligibility against the SBR criteria — total liabilities and prior use history
- Confirm where things stand procedurally — demand only, application filed, or hearing date set
- Seek professional advice as early as possible, particularly if a court date has already been set
It’s also important for directors to understand their options when a statutory demand or winding-up application is on foot. Speak with a registered practitioner as early as possible to understand what’s available in your specific circumstances.
At Halo Advisory, we work for you — the director. Financial expert Greg Bartels offers a no-obligation, consultation to help you understand where you stand, what risks exist, and what options are realistically available before deadlines reduce control. Get in touch or call 1300 400 373 today.
FAQs
Does receiving a statutory demand mean my company can’t use SBR?
No. Eligibility depends on your company’s own liabilities and prior use history, not on whether a creditor has issued a demand. A statutory demand alone doesn’t disqualify you.
Can I apply to set aside a statutory demand and pursue SBR at the same time?
Yes. An application to set aside a statutory demand under section 459G is a separate legal process from appointing an SBR practitioner. The two can run in parallel — pursuing one doesn’t prevent you from pursuing the other.
Does appointing an SBR practitioner pause the 21-day statutory demand clock?
No. Appointing a practitioner doesn’t extend or pause the 21-day compliance period. If you want to challenge or negotiate the demand itself, that still needs to be actioned within the statutory timeframe, separately from the SBR appointment.
What happens if a winding-up application has already been filed?
SBR can still be appointed. The court must adjourn the winding-up hearing if it’s satisfied that continuing under restructuring is in creditors’ interests, though appointments made later attract more scrutiny.
Once a winding-up order has been made, can I still use SBR?
No. Once a winding-up order is made and a liquidator is formally appointed, the company is under external administration and SBR is no longer available.
What percentage of creditors need to approve an SBR plan?
A restructuring plan needs approval from more than 50% of creditors by value to take effect.
Do secured creditors need to agree to the restructuring plan?
Secured creditors are treated differently to unsecured creditors under SBR.
The process runs to statutory timeframes for proposing a plan and for creditors to vote.
How long does SBR take once a practitioner is appointed?
