How Directors Should Respond to a Wind Up Notice
A practical, step-by-step guide for company directors on the correct response to a wind up notice — protecting your business, your assets, and your future.
The Golden Rule: Act Immediately
The single most important thing you can do after receiving a wind up notice is to seek professional advice immediately. Do not wait, do not ignore it, and do not assume it will go away. The 21-day clock starts the moment the notice is served.
Step-by-Step Response Guide
Confirm the Date of Service
The 21-day period begins from the date the notice was served on your company — not the date you personally received it. Check when and how the notice was delivered. If it was sent by post, the date of service may be 7 days after posting. Document everything.
Read the Notice Carefully
Identify who issued the notice, the amount claimed, and the nature of the debt. Check whether the notice is in the correct form (Form 509H) and whether it is accompanied by a supporting affidavit. Note any defects — these may be grounds to set aside the demand.
Seek Immediate Professional Advice
Contact a qualified insolvency practitioner, restructuring advisor, or specialist solicitor immediately. This is not a situation where general business advice is sufficient. You need someone with specific expertise in the Corporations Act and insolvency law.
Assess the Validity of the Debt
Work with your advisor to determine whether the debt is genuinely owed, whether there is a genuine dispute about the amount or existence of the debt, or whether there are any offsetting claims. If there is a genuine dispute, you may be able to apply to court to set aside the demand.
Review Your Financial Position
Prepare an accurate picture of your company's financial position — assets, liabilities, cash flow, and outstanding debts. This is essential for assessing all available options and determining whether your business is viable in the long term.
Evaluate All Available Options
With your advisor, evaluate every available option: paying the debt, negotiating a payment arrangement, applying to set aside the demand, entering Small Business Restructuring, Voluntary Administration, or other alternatives. Each option has different implications and timeframes.
Implement Your Chosen Strategy
Act decisively on the chosen strategy. Whether that means paying the creditor, filing a court application, or appointing an administrator, every action must be completed before the 21-day deadline. Partial actions or delays can be fatal.
Notify Your Key Stakeholders
Depending on your chosen course of action, you may need to notify your bank, key suppliers, employees, and other stakeholders. Your advisor will guide you on what communications are appropriate and when.
Director Duties During a Wind Up Notice
As a company director, you have ongoing legal duties under the Corporations Act that become especially critical when your company is facing financial difficulty. These duties include:
Duty to Prevent Insolvent Trading
You must not allow the company to incur new debts when you know (or ought to know) the company is insolvent. Breaching this duty can result in personal liability for those debts.
Duty to Act in Good Faith
You must act in the best interests of the company and its creditors, particularly when the company is in financial difficulty. Prioritising your own interests over creditors can be challenged.
Duty to Maintain Books and Records
Proper financial records must be maintained. Failure to keep adequate records is itself an offence and can complicate any restructuring or insolvency process.
Duty to Cooperate with Advisors
If an administrator or liquidator is appointed, you must cooperate fully, provide all company books and records, and attend meetings as required.
Common Mistakes Directors Make
These are the most common — and most costly — mistakes directors make when they receive a wind up notice:
- ❌ Ignoring the notice:The most common and most damaging mistake. The 21-day clock runs regardless of whether you acknowledge the notice.
- ❌ Assuming the ATO will negotiate without formal advice:While the ATO does negotiate, doing so without professional guidance often results in unfavourable outcomes or missed deadlines.
- ❌ Paying other creditors while ignoring the statutory demand:Preferential payments made in the 6 months before insolvency can be clawed back by a liquidator.
- ❌ Transferring assets to avoid creditors:Asset transfers at undervalue or to related parties can be voided by a liquidator and may expose directors to criminal liability.
- ❌ Waiting until the last few days to seek advice:Many options — including court applications to set aside the demand — require preparation time. Leaving it to the last days severely limits your options.
- ❌ Relying on general business advisors:Wind up notices require specialist insolvency and restructuring expertise. General accountants or solicitors may not have the required knowledge.
What to Tell Your Advisor
When you contact a restructuring advisor, be prepared to provide the following information to enable them to give you the best possible advice quickly:
- The original wind up notice / statutory demand document
- Date the notice was served (and how it was served)
- Name of the creditor and the amount claimed
- Your company's most recent financial statements
- A list of all current creditors and amounts owed
- Details of any ATO debt (BAS statements, notices)
- Information about any assets the company owns
- Details of any personal guarantees you have given
- Whether there is any genuine dispute about the debt
Don't Navigate This Alone
Responding correctly to a wind up notice requires specialist expertise. Our team of restructuring advisors is available 24/7 to guide you through every step.
Don't wait. Every day counts when dealing with a wind up notice.
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