If you’ve just opened a letter from Inland Revenue containing the words ‘statutory demand’ — stop, take a breath, and read this before you do anything else.
A statutory demand is one of the most serious steps IRD can take against a business. It signals that informal contact has not resolved the debt, and that IRD is now on a formal legal path that — if left unaddressed — can end in a court-ordered liquidation of your company.
The good news: receiving a statutory demand is not the end. You have options. But the clock starts ticking from the moment it is served, and time is genuinely critical.
What Is a Statutory Demand?
A statutory demand is a formal written notice issued under the Companies Act 1993. Any creditor owed more than $1,000 can issue one — including IRD. The demand requires your company to pay the debt (or reach an agreement with the creditor) within a set timeframe.
If you do not respond within that timeframe, the creditor can apply to the High Court for your company to be placed into liquidation. At that point, you lose control of the business and a court-appointed liquidator takes over.
IRD issues statutory demands when a company has an unpaid tax debt — typically GST, PAYE, or income tax — and prior contact has not resulted in payment or an agreed arrangement.
How Long Do You Have to Respond?
Under the Companies Act 1993, you have 15 working days from the date the statutory demand is served to respond. This is not a soft deadline — it is a legal one.
Once 15 working days have passed without a response, IRD can file an application with the High Court to have your company liquidated. From there, events move quickly and your options narrow significantly.
Do not wait. Do not assume the letter can sit on your desk while you think about it. Get advice immediately.
Your Options When You Receive a Statutory Demand
You have several possible responses, depending on your company’s financial position and the legitimacy of the debt.
Option 1: Pay the debt in full
If your company has the funds and the debt is valid, paying it in full within 15 working days resolves the statutory demand. IRD will withdraw the demand and no further action will be taken on that debt.
Option 2: Negotiate an instalment arrangement with IRD
If you cannot pay in full, you may be able to negotiate a payment arrangement with IRD within the 15 working day window. IRD will generally consider an arrangement if you can demonstrate you are able to meet ongoing obligations and repay the arrears over a realistic timeframe.
This is not simply a matter of calling IRD and asking for more time. A credible proposal — with a cash flow forecast and a structured repayment plan — significantly improves your chances of an arrangement being accepted. Fixity can help you prepare and present this.
Option 3: Apply to the court to set the demand aside
You can apply to the High Court to have the statutory demand set aside if:
- You have a genuine dispute about whether the debt is owed
- The amount of the debt is disputed
- You have a counterclaim against IRD that equals or exceeds the debt
- There is some other reason the demand is technically defective
This application must be filed with the High Court within 10 working days of receiving the demand — before the 15 working day response period expires. You will need legal advice to pursue this route.
Option 4: Enter voluntary administration
If your company is in financial difficulty but may still be viable with time and restructuring, voluntary administration can be a powerful option. Appointing an administrator creates a moratorium — a temporary freeze on creditor action — which pauses the statutory demand process while a rescue plan is developed.
Voluntary administration is not the right answer in every situation, but where a business has a genuine future, it can be the difference between survival and closure.
Option 5: Voluntary liquidation
If your company is not viable — if the debts are too large, the business cannot be saved, or continuing to trade would put you at personal risk as a director — a voluntary liquidation, initiated by the shareholders, is almost always better than waiting for IRD to apply to the court.
A voluntary liquidation allows you to choose your liquidator, manage the process with dignity, and often results in a better outcome for creditors than a court-ordered winding up. Fixity can guide you through this process.
What Happens If You Do Nothing?
If the 15 working day period passes without a response — no payment, no arrangement, no court application — IRD can file a winding-up application in the High Court.
Once a winding-up application is filed, your options reduce considerably. The court will set a hearing date, and unless the debt is paid or an agreement reached before that hearing, a liquidator will be appointed by the court. You will have no say in who that is.
A court liquidation is also more likely to result in scrutiny of director conduct — including whether trading continued when the company was insolvent, and whether any transactions should be clawed back. This can lead to personal liability for directors.
Director Obligations While a Statutory Demand Is Outstanding
Receiving a statutory demand is a clear signal that your company may be insolvent — unable to pay its debts as they fall due. Once this threshold is reached, directors’ obligations under the Companies Act 1993 shift significantly.
Directors must not allow the company to trade recklessly or incur further debts it cannot pay. Doing so can expose you to personal liability — meaning creditors could pursue you personally for unpaid amounts, even though the company is a separate legal entity.
This is one of the most important reasons to act quickly. The sooner you get advice, the better protected you are as an individual.
Frequently Asked Questions
Can IRD issue a statutory demand for a small amount?
Yes. The threshold under the Companies Act 1993 is $1,000 — so even a relatively small tax debt can trigger a statutory demand. In practice, IRD typically issues demands for more significant amounts, but there is no legal barrier to doing so for smaller debts.
Is a statutory demand the same as a court order?
No. A statutory demand is not a court order. It is a formal notice that precedes court action. The court process begins only if the demand is not resolved within 15 working days. However, it is the first formal step on a path that can lead to court-ordered liquidation.
My accountant told me to just pay as much as I can — is that enough?
A partial payment does not resolve a statutory demand. For the demand to be satisfied, the full amount must be paid, a formal agreement reached with IRD, or a successful court application made. Paying some of the debt may demonstrate good faith but it does not stop the clock. Get specialist advice alongside whatever your accountant is doing.
Can I keep trading while dealing with a statutory demand?
This is one of the most important questions to get right. The answer depends on whether your company is solvent — and if you are unsure, that itself tells you something. Directors who continue trading an insolvent company can be held personally liable for debts incurred during that period. You need advice on your specific situation before continuing to trade.
How quickly can Fixity help?
We understand that time matters. Contact us as soon as possible after receiving a statutory demand and we will prioritise your situation. In most cases we can meet with you — in person or by video call — within 24 hours to assess your position and outline your options.
Act Now — Free Confidential Consultation
If you have received a statutory demand from IRD, the most important thing you can do right now is pick up the phone.
Fixity offers a free, confidential initial consultation. We will assess your position, explain your options clearly, and help you decide on the best course of action — before time runs out.
Call 0800 FIXITY (0800 349 489) or email info@fixity.co.nz
We work with businesses across New Zealand, including Auckland, Wellington, Christchurch and nationwide.
Larissa Logan | Director, Fixity | Licensed Insolvency Practitioner | FCA
