What to do if your company receives a statutory demand

What is a statutory demand?

A statutory demand is a formal written demand under the Insolvency Act 1986 that gives a debtor 21 days to pay, and when it is served on a limited company for a debt of more than £750 it opens the way to a winding-up petition.

For a company the demand is made under section 123(1)(a) of the Act, usually on form SD1 from HM Courts and Tribunals Service, and the creditor draws it up and serves it without going to court. If the debt has not been paid, secured or settled to the creditor's reasonable satisfaction three weeks after service, the law treats the company as unable to pay its debts, whether or not it really is, and the creditor can ask the court to close it through compulsory liquidation.

This guide covers demands served on limited companies. If a demand is addressed to you personally, because you trade as a sole trader or signed a personal guarantee for the company, it is an individual demand under section 268 and the bankruptcy rules apply; the comparison further down shows where they differ.

What should a director do in the 21 days after a statutory demand?

Directors who receive a statutory demand should use the 21 days to pay the debt, agree terms the creditor accepts, dispute it through the court if it is genuinely not owed, or take formal advice on a rescue or closure procedure.

GOV.UK gives directors the same choices. Leave the decision late and some of them disappear: once a winding-up petition has been presented, the directors can no longer appoint an administrator without applying to court, and once the petition is advertised the bank will usually freeze the company's accounts.

Which route fits depends on everything the company owes as well as this one debt. Our guide to the options for an insolvent company compares them, and we will go through your figures with you.

What happens if a company does not pay a statutory demand within 21 days?

If a company does not pay, secure or settle a statutory demand within 21 days, section 123 of the Insolvency Act 1986 deems it unable to pay its debts, and the creditor can present a winding-up petition asking the court to wind it up.

From there the court timetable takes over. GOV.UK puts the creditor's outlay at a £352 court fee and a £2,600 petition deposit, and our guide on what to do about a winding-up petition covers the hearing and the ways a petition can still be stopped.

Can a limited company set aside a statutory demand?

A limited company cannot apply to set aside a statutory demand, because the set-aside procedure in rule 10.4 of the Insolvency (England and Wales) Rules 2016 is open only to individuals; a company that disputes the debt applies for an injunction instead.

Much of what is written online about setting a demand aside comes from personal bankruptcy. It does not apply to companies, and directors who follow it lose days preparing the wrong application. GOV.UK says plainly that you cannot challenge a statutory demand served on a company, and the High Court confirmed in 2025 that corporate insolvency law has no set-aside procedure, unlike bankruptcy (Helios Energia Ltd v IBM United Kingdom Financial Services Ltd [2025] EWHC 1513 (Ch)).

What the company can do is ask the court to stop the creditor presenting, or advertising, a winding-up petition. Rule 7.3 of the 2016 Rules requires the demand itself to tell the company it has that right and to name the court it should apply to.

How does a company dispute a statutory demand?

A company disputes a statutory demand by setting out its grounds to the creditor in writing and, if the creditor will not hold off, applying to court on form IAA within the 21 days for an injunction restraining a winding-up petition.

The court will not try the dispute on this application. It asks whether the debt is disputed in good faith on substantial grounds, meaning a dispute with a real prospect of success, or whether the company has a genuine and serious cross-claim likely to exceed the debt. A bare assertion that the money is not owed will not do, and the judge will look closely at the evidence.

Two practical points catch companies out. Disputing part of the debt does not help if more than £750 is undisputed, because the creditor can petition on that part alone. And the application goes to the court named on the demand: GOV.UK explains that this is the High Court if the company's paid-up share capital is more than £120,000, and otherwise the nearest County Court hearing centre that deals with insolvency.

Speak to a solicitor about the application itself. Before you do, gather the evidence the court will want to see.

• The contract or order. What the company agreed to buy, and on what terms.
• The invoices and statements. Including any credit notes or part payments the demand leaves out.
• The dispute in writing. Emails or letters showing what the company complained about, and when.
• Figures for any cross-claim. What the creditor owes the company, with evidence of how it is worked out.

How is a statutory demand against a company different from one against an individual?

A statutory demand against a company differs from one against an individual in its threshold and its challenge route: a company demand needs a debt over £750, bankruptcy needs £5,000 or more, and only an individual can apply to set a demand aside.

Both can arrive at once. If you personally guaranteed a debt the company cannot pay, the creditor can pursue you as well as the company, and a statutory demand served on you as an individual follows the bankruptcy rules, with only 18 days to apply to set it aside.

An individual served while abroad has longer to apply, from 21 to 34 days depending on the country, according to GOV.UK.

Does a creditor need a statutory demand before a winding-up petition?

Creditors do not need to serve a statutory demand before presenting a winding-up petition, because section 123 of the Insolvency Act 1986 also lets them prove that the company cannot pay its debts as they fall due, or rely on an unsatisfied court judgment.

The demand is a shortcut for the creditor, since it removes the need to prove anything more about the company's finances. Without one, a creditor can still show the court an undisputed invoice the company has failed to pay, or a balance sheet with more liabilities than assets. In the Insolvency Service's words, a company in England and Wales is regarded as unable to pay its debts if a creditor is owed more than £750 and can prove the company cannot pay.

So the absence of a demand is no protection. A company with overdue debts it cannot clear should take advice before any petition arrives.

How must a statutory demand be served on a company, and what must it contain?

Section 123(1)(a) of the Insolvency Act 1986 requires a statutory demand to be served by leaving it at the company's registered office, and rule 7.3 of the Insolvency (England and Wales) Rules 2016 sets out what the demand must contain.

The registered office is the address on the Companies House register, which for many small companies is their accountant's office. The 21 days run from service there, so make sure whoever receives post at that address passes it on the same day.

A valid company demand includes the following.

• The right heading. "Statutory Demand under section 123(1)(a) of the Insolvency Act 1986", with the company's details and registered office.
• A debt that is due now. The amount and how it arises, with interest and other charges shown separately. A company demand cannot cover a debt payable in future, and GOV.UK says a debt over six years old cannot usually be claimed this way.
• A named contact. The person the company can deal with to secure or settle the debt, with their address and phone number.
• The company's rights. A statement that the company can apply to the court for an injunction to stop a petition, and the name of that court.
• Assignment details. If the debt has been sold or assigned, the name of the original creditor.
• A date and authentication. By the creditor, or by someone who states they are authorised to act for it.

What does an unpaid statutory demand mean for the company's directors?

A statutory demand the company cannot pay is a strong sign that it is insolvent, and from then on its directors must give creditors' interests priority, protect the company's assets and avoid making creditors' position worse.

Those duties come from GOV.UK's guidance for directors and from the Supreme Court's decision in BTI 2014 LLC v Sequana SA [2022] UKSC 25. If directors carry on trading after the point where they should have seen that insolvent liquidation could not be avoided, a liquidator can later bring a claim for wrongful trading and ask the court to order them to contribute to the company's assets.

Paying the creditor who served the demand can be the right answer. If the company cannot pay its other creditors as well, though, the problem has only moved. A personal guarantee survives the company, so a guaranteed creditor can turn to you if the company does not pay.

How you act in this period also matters later. If the company does go into liquidation or administration, the office-holder must report to the Insolvency Service on the conduct of everyone who was a director in the previous three years, and the Insolvency Service decides whether to seek director disqualification.

Why speak to NTF about a statutory demand?

NTF Corporate Solutions is a specialist corporate insolvency practice whose advice on statutory demands comes from two named practitioners, James Kaye and Nick Morgan, licensed by the Institute of Chartered Accountants in England and Wales under the Insolvency Act 1986.

Twenty-one days is not long. Call us with the demand in front of you and a rough list of what the company owes, and we will tell you whether the debt looks disputable, whether a payment plan is realistic, and, if neither is, which formal route protects the company before the deadline. As part of the NTF group, we have helped company directors since 2009, and the first conversation is free, confidential and without obligation.