A statutory demand is a formal demand for an undisputed debt that gives 21 days before insolvency action. Used well it prompts payment quickly; used on a disputed debt it can backfire. Here is when it fits.
A statutory demand is a formal written demand for payment of a debt under the Insolvency Act 1986 — £750 or more from a company, £5,000 or more from an individual. If it is not paid or successfully challenged within 21 days, the creditor can start insolvency proceedings. It is only for a clear, undisputed debt.
The power of a statutory demand is the deadline behind it: pay, or face a petition to wind the company up.
The demand is served on the debtor and starts a 21-day clock. In that window the debtor can pay, agree terms, or — if the debt is genuinely disputed — challenge it: an individual can apply to court to have the demand set aside, and a company can ask the court to restrain a winding-up petition. If none of that happens, the creditor can present a winding-up petition against a company, or a bankruptcy petition against an individual, using the unpaid demand as evidence the debtor cannot pay. Because insolvency is a serious consequence, the demand often prompts payment on its own.
A statutory demand is a distinct route from a County Court claim, not a later stage of one. It does not produce a judgment; it is a formal warning that insolvency proceedings may follow. RobinReturn is not a law firm and does not give legal advice.
This is the mistake that turns a statutory demand into a costs order against you. Get it right before you serve one.
A statutory demand is only for a debt that is clear, due, and not genuinely in dispute. If the debtor has a real dispute or a cross-claim, the court can stop the demand — an individual can have it set aside, a company can restrain a winding-up petition — and order you to pay their costs; using the insolvency process to pressure payment of a disputed debt can be treated as an abuse of process. If there is any genuine argument about whether the money is owed, a County Court claim is the right route, not a statutory demand.
For most overdue invoices the cheaper, lower-risk first move is still a reminder and then a Letter Before Action. New to the terms here? See the glossary, or read the full recovery process.
A statutory demand is a formal written demand for payment of a debt, made under the Insolvency Act 1986. If it is not paid or challenged within 21 days, the creditor can use the non-payment as a ground to start insolvency proceedings — a winding-up petition against a company, or a bankruptcy petition against an individual.
At least £750 where the debtor is a company, and at least £5,000 where the debtor is an individual. The debt must be for a fixed, definite sum that is due now.
Twenty-one days from service to pay or reach agreement. An individual can apply to court to set the demand aside, and must generally do so within 18 days of service. After 21 days without payment or a successful challenge, the creditor can petition the court.
No — this is the key risk. A statutory demand is only for a debt that is clear and undisputed. If the debtor genuinely disputes it, the court can set the demand aside and order you to pay costs, and using it to pressure payment of a disputed debt can be treated as an abuse of process. Where a debt is disputed, a County Court claim is the appropriate route.
No. A statutory demand is not a court claim and does not itself get you a judgment. It is a formal warning that insolvency proceedings may follow. Many undisputed debts are better pursued through a reminder, a Letter Before Action and, if needed, a County Court claim — the statutory-demand route is a separate option for a clear debt where insolvency pressure is appropriate.
Start with a reminder while the debt is fresh — it is the cheapest first step, and it keeps your options open. RobinReturn is not a law firm and does not give legal advice.