Statutory Demands: The 21-Day Demand for Undisputed Debts Over £750
If a company owes you money and simply won't pay, a statutory demand can be one of the fastest and cheapest ways to force the issue. For an undisputed debt of more than £750, it puts the debtor on a strict 21-day clock: pay, reach an agreement, or face insolvency proceedings. Used correctly, it often produces payment without the delay and cost of a full court claim.
What is a statutory demand?
A statutory demand is a formal written demand for payment served under the Insolvency Act 1986. It is not a court document, and you do not need a judgment to serve one. What makes it powerful is the consequence of ignoring it. Once the 21 days expire, an unpaid demand becomes evidence that the debtor cannot pay its debts as they fall due, and for a company, that opens the door to a winding-up petition.
That threat is why a statutory demand carries real weight. Many debtors who have stalled for months pay up quickly once one arrives.
When can you use one?
A statutory demand is only appropriate where the debt is:
Over £750 for a company (the threshold for individuals is higher, at £5,000);
Due and payable — not a future or contingent liability; and
Genuinely undisputed — a fixed, quantified sum the debtor has no real grounds to challenge.
That last point is critical. A statutory demand is a tool to demonstrate insolvency, not a routine debt collection device. Serving one for a disputed debt can backfire badly, as explained below.
What happens after 21 days?
If the debtor neither pays nor reaches a written agreement to secure or postpone the debt within 21 days of proper service, you can present a winding-up petition at court. Once advertised, that petition usually freezes the company's bank accounts and alerts other creditors. That creates pressure that often prompts payment even at this late stage. If the matter reaches a hearing, the court can make a winding-up order and place the company into compulsory liquidation.
For an individual debtor, the equivalent route is a bankruptcy petition, available where the debt exceeds £5,000.
The risks of getting it wrong
A statutory demand is a blunt and serious instrument, and the courts do not look kindly on its misuse. If the debt is disputed on genuine grounds:
A company can apply for an injunction to stop you presenting a petition; and
An individual can apply to court to set the demand aside, within 18 days of service.
If a demand is set aside or an injunction is granted, you may be ordered to pay the debtor's legal costs, which can run into thousands of pounds. Using the wrong form, or serving the demand incorrectly, can also invalidate the whole process. Because the margin for error is small, it pays to get the demand right the first time.
How Lyon Croft Law can help
Our Dispute Resolution team advises creditors on whether a statutory demand is the right step, prepare and serve it correctly, and follow through with a winding-up or bankruptcy petition where needed. We also act for debtors who have received a demand and need to challenge it quickly.
Contact Lyon Croft Law today to discuss your options. This article has been authored by Abdullah Suker, Managing Director of Lyon Croft Law.
Frequently asked questions
Do I need a court judgment before serving a statutory demand? No. A statutory demand can be served as soon as the debt is due, without going to court first.
Can I use a statutory demand for a disputed debt? No. If the debt is genuinely disputed, a statutory demand is the wrong tool and may leave you liable for the debtor's costs. A standard court claim is the safer route.
How long does the debtor have to respond? Twenty-one days from proper service to pay or reach agreement. An individual has 18 days to apply to set the demand aside.
This article provides general information about the law in England and Wales and is not legal advice. For advice on your specific situation, please contact Lyon Croft Law.
