Advice For Business

Statutory Demands

A statutory demand is part of the insolvency process, giving the debtor 18 days in which to apply to set aside the demand, or 21 days to pay it.

If the debtor does not apply to set it aside or pay it within the relevant timeframe then the unanswered demand stands as proof of their inability to pay their debts as they fall due, which is grounds for commencing winding up proceedings.

However, if the debtor does apply to set aside the demand (on grounds that they dispute it) and the Court accepts that the debt is disputed then the Court can award the debtor their costs for making the application (such costs could run into the thousands of pounds, which you as a creditor would be liable to pay).

Statutory demands (and winding up proceedings) are not meant as debt collection tools; rather as mechanisms for recovering undisputed debts. Statutory demands are commonly used against companies as well as individuals.

If the debt is owed by a company, the creditor does not need to issue a statutory demand (demanding payment in 21 days) but it can be used as a precursor to issuing a winding up petition.
A statutory demand can be served on a company within the winding up jurisdiction of the courts of England and Wales.

It is often the case that a creditor has a choice as to whether to proceed with a statutory demand or a winding up petition if the debt is owed to it by a company. Choosing the right course of action is very important. We can assist you with the statutory demand or winding up petition procedure.