A statutory demand is a formal written demand for an undisputed debt which, if ignored for three weeks, lets the creditor petition to wind up a company owed more than £750 or to bankrupt an individual owed at least £5,000. An individual can apply to court to set the demand aside within 18 days of service; a company cannot, but it can apply for an injunction to stop a winding up petition being presented.

When can a creditor use a statutory demand?

Anyone owed money can make a statutory demand, and a lawyer is not required. The demand is evidence that the debtor cannot pay, which is the gateway to a winding up or bankruptcy petition:

  • Companies. Under section 123(1)(a) of the Insolvency Act 1986 a company is deemed unable to pay its debts if a creditor owed more than £750 then due leaves a demand in the prescribed form at its registered office and the company neglects for three weeks to pay, secure or compound the debt to the creditor’s reasonable satisfaction.
  • Individuals. Under sections 267 and 268 a bankruptcy petition needs a debt or debts totalling at least the bankruptcy level of £5,000, for a liquidated sum, unsecured, and with no outstanding application to set aside the demand. The debtor appears unable to pay if three weeks pass after service without the demand being complied with or set aside.

Section 268(2) also allows a demand for a debt not yet due, requiring the debtor to show a reasonable prospect of paying when it falls due. GOV.UK says a creditor cannot usually make a statutory demand for a debt more than six years old.

A statutory demand is a pressure tool, not a debt collection service. It should only be used where the debt is clear. If the debtor has a real defence, the creditor risks a set aside application or an injunction, and a costs order.

What must the demand contain?

The prescribed forms are SD 1 for a company, and separate forms for an individual depending on whether the debt is payable now, payable now following a judgment, or payable in the future. Rule 7.3 of the Insolvency (England and Wales) Rules 2016 requires a company demand to include, among other things:

  • the heading referring to section 123(1)(a), the company’s identification details and registered office;
  • the amount of the debt and the consideration for it, and details of any judgment;
  • a statement that the company must pay within 21 days of service, after which a winding up petition may be presented;
  • a named individual the company can contact to secure or compound the debt;
  • a statement that the company may apply to court for an injunction restraining a petition, and which court.

Interest or other charges not previously notified must be shown separately, limited to what had accrued at the date of the demand. Rule 10.1 sets similar requirements for an individual, including statements that the debtor may apply to set the demand aside within 18 days and could be made bankrupt if the demand is not dealt with within 21 days. Where the creditor holds security, the demand must say so and value it.

How must it be served?

GOV.UK says the demand must be served by:

  • giving it to the individual, trying all known addresses;
  • leaving it at the registered office of a company or partnership, or the main place of business if there is no registered office;
  • giving it to a director, company secretary, manager or principal officer; or
  • using a process server.

Registered post or a letterbox should only be used if personal delivery is not possible. For individuals, rule 10.2 requires the creditor to do all that is reasonable to bring the demand to the debtor’s attention and to serve it personally if practicable. Rule 10.3 requires a certificate of service, verified by a statement of truth, to be filed with any bankruptcy petition. The creditor should keep a copy of the demand and evidence of when and how it was served.

What happens if the debtor ignores it?

Once 21 days have passed without payment or agreement, the creditor can petition to wind up a company owing £750 or more or bankrupt an individual owing £5,000 or more. GOV.UK says the creditor has four months to apply; after that the creditor must explain the delay to the court. For the company process, see compulsory liquidation.

A company that receives a demand it cannot pay has other options. GOV.UK lists paying, agreeing to pay in future, for example through a company voluntary arrangement, putting the company into administration, or applying to wind it up voluntarily.

How does an individual set a demand aside?

Under rule 10.4 the debtor must apply within 18 days of service, using form IAA and a witness statement giving the date they became aware of the demand, the grounds and the supporting evidence. GOV.UK says the period is 21 to 34 days if the debtor was abroad when served. Filing the application stops the 21 day compliance period running.

The court may dismiss a hopeless application without a hearing, in which case time runs again. Otherwise it fixes a hearing with at least five business days’ notice. Rule 10.5(5) says the court may set the demand aside if:

  1. the debtor appears to have a counterclaim, set off or cross demand equal to or more than the debt;
  2. the debt is disputed on grounds that appear substantial;
  3. the creditor holds security and has not disclosed it properly, or the security is worth at least the full debt; or
  4. the court is satisfied on other grounds that the demand ought to be set aside.

If the application fails, the court makes an order authorising the creditor to present a bankruptcy petition. GOV.UK notes that a demand based on another court’s judgment will not usually be set aside unless, for example, the creditor owes the debtor at least as much or the debt is secured.

What can a company do instead?

GOV.UK states plainly that a company cannot challenge a statutory demand through the set aside procedure. Instead it can apply to restrain the creditor from presenting or advertising a winding up petition, and the demand itself must tell the company it has this right. GOV.UK says the application should be made within 21 days of receiving the demand, on form IAA. It goes to the court nearest the registered office if paid up share capital is under £120,000, or the High Court if it is more.

In practice the evidence needs to show why a petition would be inappropriate, for example that the debt is genuinely disputed or that the company has a cross claim. A company that simply cannot pay is better served by taking insolvency advice than by applying for an injunction. Directors should also review the insolvency tests, because a demand they cannot meet may mean their duties now favour creditors.

How might this look for an accountancy practice?

Illustration only. A practice is owed £4,000 in fees by a limited company client and £3,500 by a sole trader client. Neither debt is disputed and both are under six years old.

  • The company debt exceeds £750. The practice serves form SD 1 at the registered office, keeping the process server’s certificate. If 21 days pass without payment or an agreement, it may petition to wind up the company.
  • The sole trader debt is below the £5,000 bankruptcy level, so a statutory demand cannot lead to a bankruptcy petition on its own. A county court claim or a payment plan is more realistic.

Had the company disputed the quality of the work in writing before the demand, with some evidence, the practice would face a real risk of an injunction and costs. A clear engagement letter and prompt credit control make a statutory demand far more effective.

What mistakes do creditors and debtors make?

  • Creditors using a demand for a disputed debt, or including unnotified interest and charges without separating them.
  • Serving by post when personal service was practicable, then struggling to prove service.
  • Waiting more than four months before petitioning without a good explanation.
  • Individual debtors missing the 18 day deadline; extensions are possible but not guaranteed.
  • Company directors ignoring a demand because they believe it is wrong, rather than applying for an injunction within the 21 days.
  • Suppliers forgetting that unpaid goods may still be recoverable under a retention of title clause.

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Sources

Reviewed by Christine Anderson, Broker, Solar Protect. Last reviewed 8 October 2026. Part of Accountapedia, the Solar Protect guide to UK tax and accounting. This page is general information, not personalised advice.