The short answer
A statutory demand is a formal written demand for payment of an undisputed debt. Against a company, the debt must be at least £750. The company has 21 days to pay, agree terms, or apply to court. If it does neither, the creditor can use the unpaid demand as evidence the company cannot pay its debts and present a winding-up petition. A demand can be challenged where the debt is genuinely disputed.
A statutory demand is one of the most serious letters a company can receive, because it is the recognised first step towards a winding-up petition. This guide explains what it is, the £750 threshold, the strict 21-day clock, and the options for responding — including how to set one aside.
Statutory demand at a glance
- What it is Formal written demand for an undisputed debt
- Company debt threshold £750 or more
- Time to respond 21 days
- If ignored Creditor can present a winding-up petition
- If debt is disputed Can be challenged/set aside
- Not issued by A court — it is a creditor document
What a statutory demand is
A statutory demand is a prescribed-form document a creditor serves to demand payment of a debt that is due and not genuinely disputed. It is not a court order — a creditor can issue one without going to court first, and there is no fee — but it carries real weight because an unpaid demand is treated as evidence that a company is unable to pay its debts under section 123 of the Insolvency Act 1986. In other words, it converts an ordinary unpaid invoice into the first formal step of an insolvency process. That is why receiving one should never be brushed aside as just another reminder letter.
The thresholds and the clock
| Element | Company |
|---|---|
| Minimum debt | £750 |
| Time to respond | 21 days |
| Consequence of ignoring | Winding-up petition |
The 21-day period is strict and runs from service of the demand. If the company does not pay the debt, secure it, or compound it (reach an agreement) to the creditor’s reasonable satisfaction within that time, the creditor can move to the next stage and present a winding-up petition. The debt must be for a fixed, definite sum — a statutory demand cannot be used for a claim that is unliquidated or genuinely in dispute.
How to respond to a statutory demand
There is no single right answer; the best response depends on whether the debt is owed and whether the company can pay. The realistic options are:
- Pay the debt — the simplest answer if the money is genuinely owed and affordable.
- Negotiate — agree a repayment arrangement or settlement that the creditor accepts in writing.
- Dispute it — if the debt is genuinely disputed on substantial grounds, or you have a real counterclaim, apply to court to restrain a petition before the deadline passes.
- Get advice — if the company genuinely cannot pay, take insolvency advice quickly rather than ignoring the demand.
Setting aside or challenging a demand
If the debt is genuinely disputed on substantial grounds, is not yet due, or the company has a real and quantifiable counterclaim, the demand can be challenged. For a company — unlike for an individual facing bankruptcy — there is no formal “set aside” procedure for the demand itself; instead the company applies to court for an injunction to restrain the creditor from presenting a winding-up petition. Because the timescales are tight and the consequences serious, acting fast and with professional advice is essential.
When a creditor cannot use a statutory demand
A statutory demand is not appropriate in every situation, and a creditor who misuses one risks having any resulting petition struck out and being ordered to pay costs. It cannot properly be used where the debt is genuinely disputed on substantial grounds, where the sum is below the £750 threshold, where the debt is not yet due, or where the company has a legitimate cross-claim that equals or exceeds the debt. Courts treat the winding-up process as a tool of last resort for clear, undisputed debts, not as a debt-collection lever for contested invoices. If you receive a demand for a debt you genuinely dispute, that is itself a ground to challenge it rather than pay.
Where it leads if unanswered
An unanswered statutory demand is the usual prelude to a winding-up petition, which can in turn lead to compulsory liquidation and the end of the company. HMRC frequently uses this route to recover unpaid tax — see HMRC winding-up petitions. The key message is simple: treat a statutory demand as the moment to take decisive action, not as the final warning before one.
Received a statutory demand and not sure how to respond?
The 21-day clock is unforgiving. A licensed insolvency practitioner can review your options — pay, negotiate, dispute or restructure — before the deadline passes.
Frequently asked questions
How much must the debt be for a statutory demand against a company?
The debt must be at least £750. Below that figure a statutory demand cannot be used as the basis for a winding-up petition against a company.
How long do you have to respond to a statutory demand?
Twenty-one days. Within that time the company must pay, secure or compound the debt, or take steps to challenge the demand, or risk a winding-up petition.
Can you dispute a statutory demand?
Yes, if the debt is genuinely disputed on substantial grounds or there is a real counterclaim. A company can apply to court to restrain a winding-up petition based on the demand.
Does a statutory demand come from a court?
No. A creditor issues it directly without a court order. Its power comes from being usable as evidence of inability to pay in later winding-up proceedings.
Sources & further reading
- Insolvency Act 1986 — s.123 (inability to pay debts)
- GOV.UK — Statutory demands
- The Insolvency Service — guidance for company directors
- Insolvency (England and Wales) Rules 2016
This guide is general information, not formal insolvency advice. Your situation must be assessed by a licensed insolvency practitioner before you act.