This guide is maintained as a current resource for September 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.
Comprehensive guide to statutory demands against companies in England and Wales: what they are, how they are served, key deadlines, company responses and potential legal consequences under insolvency law.
A statutory demand is a formal, written request for payment of a debt that a company owes to a creditor. It is a powerful legal tool that can demonstrate a company's inability to pay its debts when they fall due and, if left unresolved, may lead to compulsory liquidation (“winding up”). This article explains the statutory demand process step by step under the law in England and Wales, how companies are expected to respond, relevant time limits, potential consequences and practical considerations for directors, creditors and professional advisers. The aim is to be clear and accessible to non‑lawyers while remaining accurate for solicitors.
What Is a Statutory Demand?
A statutory demand is a formal insolvency document served by a creditor on a company to demand payment of an undisputed debt within a fixed period. Its purpose is not merely to collect a debt but to show that the debtor company may be unable to pay its debts when due – one of the key tests for insolvency under section 123 of the Insolvency Act 1986. Although there is no express statutory requirement to serve a statutory demand before presenting a winding‑up petition, it is common practice because failure to comply within the time limit creates strong evidence of inability to pay.
Minimum debt thresholds:
- Company: typically at least £750 owed and undisputed.
- Individual (for context): at least £5,000 owed and undisputed.
The demand must be in writing, specify the amount claimed, and set out the consequences of non‑compliance. It is not itself a court document, but the Insolvency (England and Wales) Rules 2016 set out the information it must contain.
When Can a Creditor Serve a Statutory Demand?
A creditor may serve a statutory demand when:
- The debt is due and payable and not genuinely disputed on substantial grounds.
- The amount claimed meets the statutory threshold (typically £750 for companies).
- The creditor can provide clear evidence of the debt, such as invoices or a court judgment confirming the amount owing.
- The debt is not time‑barred by limitation (six‑year limit for many types of unsecured debts).
Statutory demands are intended for undisputed debts. Using this process for a debt that is genuinely in dispute can lead to challenges and additional legal costs.
How to Serve a Statutory Demand on a Company
Serving a statutory demand correctly is crucial. If the demand is not properly served, it may not be effective or could be challenged later:
- Registered office: deliver the statutory demand to the company's registered office (as shown on the Companies House register).
- Main place of business: where the company does not have a registered office.
- Direct delivery: hand it to a director, company secretary, manager or principal officer.
- Using a process server: a solicitor or private process server can ensure proof of service is obtained and properly recorded.
Record keeping: creditors must retain evidence of service (e.g. delivery records, process server affidavit, signed receipts) because proof of valid service may be required in later court proceedings.
Time Limits and Company Response
21‑Day Compliance Period
Once a company has been validly served with a statutory demand, it has 21 days to respond. During this period, the company must:
- Pay the debt in full;
- Reach an agreement with the creditor about payment terms;
- Otherwise take steps to address the situation (for example, entering formal insolvency procedures such as administration or a company voluntary arrangement).
Failure to act within 21 days may allow the creditor to present a winding‑up petition based on the statutory demand as evidence that the company cannot pay its debts.
Winding‑Up Petition Timing
Normally, a creditor wishing to rely on a statutory demand to support a winding‑up petition should do so within four months of service of the demand. If later, the creditor may need to explain the delay to the court.
Can a Company Challenge a Statutory Demand?
Unlike individuals, companies do not have a formal statutory process to “set aside” a statutory demand. Instead, a company wishing to resist the threat of a winding‑up petition must:
- Apply for an injunction to restrain the creditor from presenting a winding‑up petition based on the demand; or
- Oppose the winding‑up petition once presented, typically by demonstrating that the debt is genuinely in dispute on substantial grounds.
For individuals, setting aside a statutory demand has its own time limits and procedures, but this does not apply directly to company debtors.
Practical Consequences for Companies
If a statutory demand is ignored and a winding‑up petition is presented and successful:
- The company may be placed into compulsory liquidation by the court.
- Winding‑up proceedings are public and can damage commercial reputation.
- Banks and suppliers often act on learning that a winding‑up petition has been presented, potentially freezing accounts and withdrawing credit.
Because the consequences can be severe, directors should treat the service of a statutory demand with urgency and seek professional advice if they are unsure how to respond.
Common Questions
Is a statutory demand the same as a debt collection letter?
No. A statutory demand is a formal insolvency tool under the Insolvency Act 1986. It differs from informal demand letters and carries specific statutory consequences if ignored.
Does serving a statutory demand mean the company is insolvent?
Not automatically. A statutory demand suggests that the creditor believes the company cannot pay its debts, but insolvency is ultimately a question for the court. A winding‑up petition or other insolvency procedures are needed to officially determine insolvency.
Can a creditor force payment immediately after serving a demand?
The creditor must wait the 21‑day period before acting on non‑compliance. For enforcement or winding‑up proceedings, they must follow the statutory process.
Key Takeaways
A statutory demand is a structured legal notice used by creditors to demand payment of an undisputed debt from a company within 21 days. Valid service and compliance with statutory formalities are essential. If the company fails to respond appropriately within the statutory period, the creditor may use the demand as evidence to support a winding‑up petition in the court. Companies do not have a direct “set aside” mechanism; instead, they must seek court orders to restrain or oppose subsequent petitions. Because the consequences of a statutory demand can be serious, prompt and informed action is vital for both creditors and company directors.
