This guide is maintained as a current resource for July 2026 and covers only the laws of England and Wales. Information is for general guidance, not legal advice. Consult a qualified solicitor for advice specific to your situation.
Learn how directors can respond to a statutory demand served on their company in England and Wales. This comprehensive guide explains the 21‑day response period, options such as payment, negotiation, disputing the debt, applying for injunctions, defending winding‑up petitions, and practical steps to protect the business and legal position.
Receiving a statutory demand as a director of a company can be a significant and urgent legal challenge. A statutory demand is a formal written request for payment of an outstanding debt that gives the company 21 days to act before a creditor can use it as evidence of insolvency and apply to wind the company up. This article explains, in clear and accessible terms, what directors need to know: how to respond, what options are available, and what the legal and practical consequences may be.
What Is a Statutory Demand?
A statutory demand is a written notice served under the Insolvency Act 1986 requiring payment of a debt within 21 days of service. If the company fails to settle the debt or otherwise respond, creditors may use the unpaid demand as evidence that the company cannot pay its debts and apply to a court to wind up the company.
The demand is a serious step in debt enforcement, signalling that the creditor may pursue formal insolvency proceedings if the company does not act within the statutory timeframe.
Immediate Steps on Receiving a Statutory Demand
When a statutory demand is served on your company, you typically have 21 days from the date of receipt to take action. This period is strict, and failure to respond within it can have significant legal consequences.
1. Confirm Receipt and Review the Demand
As soon as a statutory demand arrives:
- Check the date of service to confirm the deadline.
- Verify the amount claimed and the basis of the debt.
- Review whether the demand has been served correctly (e.g. to the registered office or principal place of business).
Proper service and accurate debt details are important; any procedural errors may affect later legal options.
Responding Within the 21‑Day Period
Within the 21‑day window, directors have several possible responses:
1. Pay the Debt in Full
The simplest response to a statutory demand is to pay the outstanding debt within the time allowed. This immediately resolves the demand and avoids escalation to insolvency proceedings.
2. Agree a Payment Plan With the Creditor
If the company cannot pay the full amount, you may negotiate with the creditor to agree a payment plan, for example through instalments or a Company Voluntary Arrangement (CVA). It is good practice to obtain written confirmation that the creditor accepts the arrangement and will not proceed with a winding‑up petition.
Responding With Legal Defences
Unlike individuals, companies cannot apply to have a statutory demand formally “set aside” once served. Instead, a company has limited legal defences and must act quickly to protect its position.
1. Dispute the Debt on Substantial Grounds
If the company genuinely disputes the debt (for example, if it is not owed, or the amount claimed is incorrect), the director should:
- Put the dispute in writing clearly setting out the reasons why the debt is disputed.
- Provide evidence, such as contracts, correspondence or invoices, to support the dispute.
While there is no formal “set‑aside” procedure for company statutory demands, demonstrating a genuine dispute can support later applications for injunctive relief or resisting a winding‑up petition.
2. Show a Cross‑Claim or Counterclaim
If the company believes it has a valid cross‑claim or set‑off against the creditor (for example, if the creditor owes the company money exceeding the amount claimed), explain this in writing to the creditor. That evidence may also be relevant if a court is asked to consider injunctive relief or hear opposition to a winding‑up petition.
3. Apply for an Injunction to Restrain Presentation of a Petition
Because there is no formal process to set aside a statutory demand on a company, one key legal option is to apply to the court for an injunction preventing the creditor from presenting or advertising a winding‑up petition based on the demand. Grounds for such an application include:
- A genuine dispute on substantial grounds.
- A valid cross‑claim or set‑off that outweighs the creditor's claim.
- Procedural issues relating to the demand or creditor conduct.
An injunction application must be made within the 21‑day period after service of the demand, and evidence supporting it should be filed with the application.
What to Do if a Winding‑Up Petition Is Filed
If the creditor proceeds to file a winding‑up petition because the company did not resolve or adequately respond to a statutory demand, directors still have opportunities to defend:
- Oppose the winding‑up order by demonstrating disputes over the debt or other legal defences in court.
- Negotiate with the creditor to settle or secure undertakings to withdraw the petition.
- Seek legal advice promptly to prepare representations to the insolvency court.
Responding to a petition requires specific steps and adherence to court rules, including lodging evidence and attending hearings.
Practical Considerations for Directors
Seek Professional Advice Early
Given the urgency and technical nature of statutory demands and potential winding‑up actions, directors should consider consulting solicitors or insolvency practitioners promptly. Expert advice can help assess whether valid defences exist and ensure procedural steps are correctly followed.
Keep Detailed Records
Documentation such as correspondence with the creditor, evidence of disputes or counterclaims, and records of payment discussions may be crucial in defending against further legal steps or applications for injunctive relief.
Understand the Consequences of Inaction
Failure to respond to a statutory demand within 21 days can lead to the creditor applying to wind the company up. A winding‑up order typically results in the appointment of a liquidator and the end of trading for the company. Directors may also face reputational and financial consequences.
Key Takeaways
When a company receives a statutory demand, directors generally have 21 days to act. Practical responses include paying the debt, agreeing a payment plan, or negotiating with creditors. Legal defences include putting the debt in dispute on substantial grounds, asserting cross‑claims or set‑offs, or applying for an injunction to prevent a winding‑up petition. Unlike individuals, companies do not have a straightforward “set aside” procedure for a statutory demand, so early action and careful documentation are essential to protect the company's interests and avoid escalation to formal insolvency proceedings.
