TGIF 30 October 2026 – Statutory demands: restructuring doesn’t stop the clock

This week's TGIF considers a recent NSW Supreme Court decision that small business restructuring does not extend a creditor's time to rely on an unsatisfied statutory demand as a basis for presuming insolvency.

Key takeaways

• To rely on the presumption of insolvency, the creditor must file its winding up application within three months after the time for complying with the statutory demand expires. A company entering restructuring does not give the creditor extra time to file.
   
• If a creditor files a winding up application outside the three month window, the presumption of insolvency is not available. The company can then argue it does not owe the debt. If that dispute is genuine, the creditor cannot rely on that debt alone to have the company wound up. 
   
• A creditor can still apply to wind up a company while it is in restructuring. A court must, however, put the hearing on hold if continuing the restructuring is in the interest of the company’s creditors.

Background

On 20 October 2026, the Supreme Court of New South Wales (In the matter of Able Technology Group Pty Ltd [2026] NSWSC 1283) determined the appointment of small business restructuring practitioners does not extend the three-month period within which a creditor may rely on a company's failure to comply with a statutory demand to establish a presumption of insolvency.  

On 9 January 2024, Makisu Holdings Pty Ltd (Makisu) issued a Letter of Engagement to Able Technology Group Pty Ltd (Able) for the opportunity to advise on a capital raise. Makisu's fees included a capped revenue share paid monthly. The capital raise was successful, and Makisu, Able and Makisu's sole director entered into a Share Subscription Deed to give effect to the revenue share payment. 

On 10 April 2026, Makisu served a statutory demand on Able for $70,541.85 for failing to pay the revenue share invoices issued. 

On 1 May 2026, the last day for complying with the statutory demand, Able's board appointed joint small business restructuring practitioners. Makisu was listed in the practitioners' report as an unsecured creditor for $70,541.85. Able's creditors did not accept the restructuring plan, and the restructuring ended on 9 July 2026. 

On 17 July 2026, Able's solicitors wrote to Makisu asking whether Makisu needed to hold an Australian Financial Services Licence (AFSL) or be an authorised representative, and reserved Able's rights. Makisu denied it was required to hold an AFSL. 

On 3 August 2026, Makisu filed an application to wind up Able, relying on Able's failure to comply with the statutory demand to establish a presumption of insolvency. 

On 21 August 2026, Able served a notice rescinding both the Letter of Engagement and the Share Subscription Deed. 

Able’s position

Able opposed the winding up application, including on the basis that:

• Makisu's winding up application relied only on Able's failure to comply with the statutory demand served on 10 April 2026; 
   
• Makisu was not a creditor; 
   
• there was no presumption of insolvency. Able's failure to comply with the statutory demand occurred at midnight on 1 May 2026, when the 21-day period ended. Because that failure occurred more than three months before the winding up application was filed (on 3 August 2026), the presumption of insolvency did not arise; and 
   
• there was a genuine dispute about the alleged debt. 

Makisu’s position

Makisu applied to amend its application to seek:

• a declaration that it was entitled to rely on the presumption of insolvency because: 
   
  • section 453S of the Corporations Act 2001 (Cth) (the Act) prevented Makisu from starting a winding up application during Able's restructuring; and 
     
  • section 458C of the Act extended the period within which Makisu could commence a winding up application relying on the presumption of insolvency by the length of the restructuring; 
     
• winding up on the ground of insolvency; and 
   
• alternatively, winding up on the just and equitable ground. 

Makisu’s application dismissed

Justice Nixon dismissed Makisu’s application to wind-up Able and its application to amend. His Honour determined:

• The appointment of a restructuring practitioner does not prevent a winding up application being brought against the company during the restructuring period. This is because section 453S does not apply to winding up proceedings, so section 458C did not extend the time. 
   
• To rely on the presumption of insolvency, Makisu had to file its winding up application within three months of 1 May 2026. 
   
• Because Makisu's winding up application was not filed within the three month window, there was no presumption of insolvency and Able could dispute the debt. 
   
• The debt came from agreements Able claims to have rescinded, which raised “plainly controversial” issues. His Honour found that Makisu's status as a creditor was “based on disputed or otherwise unclear legal rights and duties”. Accordingly, Makisu had no standing as a creditor to bring the winding up application. 
   
• Able had acknowledged the debt by email, did not apply to set aside the statutory demand, and listed Makisu as a creditor in the practitioners’ report. However, the evidence of Able's director was he only became aware of the AFSL issue in mid-July 2026. The Court did not need to finally decide this point having determined there was a genuine dispute and Makisu did not have the standing to bring the winding up application. 
   
• Makisu argued it was a contingent creditor because it might obtain a costs order in its favour. The Court rejected this argument. Makisu was ordered to pay Able's costs. 

Comment

For creditors, timing is critical. To rely on the presumption of insolvency, a creditor must file its winding up application within three months after the time for complying with the statutory demand expires. Small business restructuring does not extend that window. Outside the window, the debtor can dispute the debt, and if the dispute is genuine, the creditor may lack standing. A fresh statutory demand may help, but only if the debt is not genuinely disputed.

For debtors, restructuring offers limited protection. It does not stop a creditor from applying to wind up a company. However, a court must adjourn the hearing if satisfied continuing the restructuring, rather than winding up, is in the interests of the company’s creditors. A genuine basis to dispute or rescind the underlying contract may defeat the winding up application, even after earlier admissions. The debtor should act promptly, because a rescission notice must be given within a reasonable period after it becomes aware of the relevant facts.