What Is a Statutory Demand?
A statutory demand is a formal, legal request for payment of a debt. It is often used by creditors (including individuals, companies, or HMRC) to demand repayment of a debt of £750 or more from a company, or £5,000 or more from an individual.
It acts as a warning: pay the debt, reach an agreement, or face the risk of being wound up or declared bankrupt.
Key Features of a Statutory Demand
- Not a court action: It doesn’t require going to court initially, making it a fast and cost-effective debt recovery tool.
- Served in writing: The demand must be delivered directly to the company’s registered office (or an individual’s address).
- Deadline: The debtor has 21 days to:
- Pay the full amount
- Reach a repayment agreement
- Dispute the demand
What Happens If You Ignore It?
If the debt is not paid or challenged within 21 days, the creditor can use the statutory demand as evidence to prove insolvency and apply to:
- Wind up a company (compulsory liquidation)
- Bankrupt an individual
This makes it a very powerful legal tool—and one that should not be ignored.
Can You Dispute a Statutory Demand?
Yes, but only under valid grounds, such as:
- The debt is genuinely disputed
- The amount is incorrect
- The demand wasn’t properly served
If a dispute exists, it’s crucial to act before the 21-day deadline, ideally with legal advice.
Final Thoughts
A statutory demand is a serious warning sign. It’s often a last resort before full legal insolvency proceedings. If your company receives one, it could be an early chance to address financial trouble—before things spiral into liquidation.
Don’t ignore it. Seek professional advice immediately to explore your options, whether that’s settling the debt, negotiating terms, or challenging the demand.
Early action is key—waiting could cost your business everything.
Keywood Group is an independent firm of Licensed Insolvency Practitioners based in Birmingham and London, specialising in providing confidential and expert advice on all aspects of corporate insolvency.
