Statutory Demands: A UK Director’s Guide to Deadlines, Risks & Next Steps

The envelope is often unremarkable. The document inside, headed “Statutory Demand under Section 123(1)(a) of the Insolvency Act 1986”, is not. It is a formal legal instrument, and its arrival starts a 21-day clock that ends, if nothing changes, with your company facing a winding-up petition.

By the time a director rings us about one of these, they have usually lost a night over it and been told by someone at the golf club that it is probably just a scare tactic. It is not a scare tactic.

Below is what the demand actually is, the thresholds that govern it, what your 21 days mean in practice, and the mistakes we watch directors make in that window that quietly close off your better options.

What a Statutory Demand Against a Company Is and Why It Matters

A statutory demand is a formal written demand for payment of a debt, served on a company under section 123(1)(a) of the Insolvency Act 1986. It is the most direct gateway into corporate insolvency proceedings available to an unsecured creditor.

Three features make it distinct from ordinary debt collection:

• Statutory presumption of insolvency. If unpaid for 21 days, the demand creates a rebuttable presumption that the company cannot pay its debts, the trigger for a winding-up petition.
• No set-aside procedure for companies. Unlike personal statutory demands, corporate demands cannot be set aside through a summary application. The only corporate remedy for dispute is an injunction to restrain a petition.
• Cost-efficient for creditors. Issuing a statutory demand costs the creditor no court fees and no legal formalities beyond the prescribed form. It is therefore a popular first step for commercial creditors seeking to apply pressure.

Directors who treat a statutory demand as “just another collection letter” misread the instrument. The 21-day clock is real; the consequences of ignoring it are mechanical. If your company has received one, your first call should happen today, not at day 14.

Statutory Demand Key Deadlines and Thresholds

The technical requirements a valid statutory demand against a company must meet:

• Debt threshold: £750 or more. Below this, a statutory demand cannot support a winding-up petition. The threshold was raised from £750 during COVID to £10,000 under the Corporate Insolvency and Governance Act 2020 but has since reverted to £750.
• Debt undisputed and due. The debt must be liquidated (a specific sum) and not subject to genuine dispute on substantial grounds.
• Prescribed form. The demand must use the statutory form (Form SD1 or the closest equivalent under current rules), set out the amount, basis of the debt, and consequences of non-payment, and be signed by the creditor or their agent.
• Service at the registered office. The demand must be delivered to the company’s registered office address (as shown on Companies House), or by personal service on an officer of the company. Service by post is usually acceptable; email is not, without prior agreement.

The 21-day period runs from proper service. Days are calendar days, not business days. If day 21 falls on a weekend or bank holiday, the presumption still takes effect on that date, meaning the creditor is entitled from then on to treat your company as unable to pay its debts.

Count your days from the service date, not from the day you first saw the document. That gap is where the damage usually happens.

The demand goes to your registered office, which for a good number of the companies we deal with is the accountant’s office rather than the trading premises. It sits in a tray there until someone does the post run on Thursday, and four days of your 21 are gone before anyone at your company has read a word of it.

Immediate Risks for Directors If a Statutory Demand Is Ignored

Ignoring a statutory demand triggers a predictable mechanical sequence:

1. Day 22, the creditor can present a winding-up petition. Court fee £352 plus £2,600 deposit for the Official Receiver.
2. Petition advertised in The Gazette, normally no earlier than seven business days after the petition is served and no later than seven business days before the hearing, unless the court orders otherwise. A bank that sees the notice will often restrict the account, because if the court later makes a winding-up order, dispositions of company property made after the petition was presented can be void unless the court validates them.
3. Hearing listed typically 4–6 weeks after advertisement. The court considers the petition and makes a winding-up order unless the company has paid the debt, agreed a compromise, or entered administration.
4. Compulsory winding-up order made. Official Receiver appointed, then a licensed liquidator. Director control of the company ends.

At the hearing stage, other creditors can support or oppose the petition. Once advertised, the petition becomes visible to every creditor, and additional creditors often join (or cross-petition) to protect their positions.

What started as an argument with one supplier is now a queue of creditors on a liquidation track. This is the point, in our experience, where control of the company’s future leaves the director’s hands entirely, and it tends to announce itself in a very ordinary way: the card machine stops settling, or the payroll run bounces on a Friday because the bank has read the Gazette before you have.

Director conduct is reported to the Insolvency Service by the liquidator within three months of appointment, under section 7A of the Company Directors Disqualification Act 1986. Where conduct is found to be unfit, disqualification proceedings follow.

How to Respond to a Company Statutory Demand Within the 21-Day Period

Four realistic options inside the 21 days:

• Pay the debt in full. The cleanest response where the debt is valid and the company has the funds. Payment must be confirmed in writing with the creditor to prevent them from presenting a petition anyway.
• Secure the debt to the creditor’s satisfaction. A charge over an asset, a guarantee, or an escrow arrangement can satisfy the creditor that payment is forthcoming without immediate cash being available.
• Compound the debt. A written agreement with the creditor to pay on modified terms, typically partial payment immediately, balance over 3–12 months. The creditor’s written acceptance stops the clock.
• Apply for an injunction to restrain the petition. Where the debt is genuinely disputed on substantial grounds, subject to a cross-claim, or the demand is an abuse of process. Specialist insolvency-litigation work; needs to be in motion by day 10–12 to complete before day 21. For the specific procedure and grounds, see our guide on how to challenge a statutory demand against a company.

A fifth option, where formal insolvency is the right answer, is to enter administration directly, the statutory moratorium stops the creditor’s petition and opens rescue or sale of the business.

Common Mistakes and Misconceptions About Statutory Demands

The patterns that recur in cases we’re instructed on:

• Confusing corporate and personal set-aside. Personal debtors can apply to set aside under Insolvency Rule 10.5. Companies cannot. Chasing corporate set-aside wastes the response window.
• Partial payment to stop the clock. Part payment, without a formal written agreement on the balance, does not stop the clock. The creditor can still petition for the unpaid portion.
• Negotiating by email without written acceptance. Open correspondence is not acceptance. Only written acceptance of specific modified terms stops the presumption arising at day 22.
• Seeking advice at day 18. Injunctions need 1–2 weeks to prepare. Compounding needs time to document. Day 1–7 is when specialist advice buys the most value.
• Paying a disputed debt to avoid the petition. Once paid, the payment is hard to recover even if the debt turns out to have been genuinely disputed. If the dispute has substance, the injunction route preserves both the challenge and the company’s cash.

Illustrative Scenarios for Directors Facing a Statutory Demand

Three common patterns, with the usual right answer for each:

Scenario 1: Valid debt, company can pay

Pay it, then get written confirmation from the creditor that the debt is settled and that no petition will follow. Keep that confirmation somewhere you can find it again. The cost is the debt plus whatever interest has accrued, and that is the cheapest this problem is ever going to be.

Scenario 2: Valid debt, company cannot pay in full

Propose a written compounding arrangement, which is simply a formal agreement to settle the debt on modified terms. In practice that usually means an immediate payment of 20 to 40 per cent plus monthly instalments over three to twelve months, backed by cash flow figures the creditor can actually check. Get their acceptance in writing.

Then perform on it. The instalment plans we see fail are almost never the ones the creditor refused; they are the ones the director agreed to at a number the company was never going to hit. Miss a payment and the creditor is free to petition, only now with your own signed schedule as evidence that the company cannot pay.

Scenario 3: Disputed debt, company has grounds to challenge

Instruct an insolvency-litigation solicitor on day one or two, not day fifteen. Your evidence of the dispute needs pulling together, which means the contract, the correspondence and any cross-claim documents.

Then comes an injunction application to stop the petition being presented at all, with your hearing usually a week or two after that. The costs are real, though recoverable if the injunction is granted.

Most cases resolve through Scenario 1 or 2. Scenario 3 is the minority where there is a genuine legal defence to the debt. We advise directors across all three patterns; your scenario determines your costs and your timeline.

Your Next Step on a Statutory Demand Against a Company

If a statutory demand has arrived for your company, the first two calls are to a licensed insolvency practitioner and, where there are grounds to dispute the debt, to an insolvency-litigation solicitor. Make both before day 7, while every option is still open to you. After day 14 the choices get narrower and more expensive, in that order.

Directors often put that call off because it feels like an admission that the company is finished. In the cases we handle it is usually the opposite: the ones who ring in the first week tend to keep control of what happens next, and a fair number never get near a petition at all.

Our licensed IPs and business rescue specialists can assess the position, explain the compounding and injunction routes, and, where formal insolvency is the right answer, implement it before the creditor’s petition forces the timing. Call us free on 0800 074 6757 for confidential advice.

FAQs on Statutory Demands

Related Guides

• Challenging a Statutory Demand: the injunction route where the debt is genuinely disputed.
• Winding-Up Petitions: what happens if the 21 days run out and a petition follows.
• Winding-Up Petition vs Compulsory Liquidation: the difference between the application and the order.
• Validation Orders: court permission to keep paying staff and suppliers once a petition is live.
• Creditors’ Voluntary Liquidation: the director-led route, while it is still available to you.
• Company Voluntary Arrangement: a creditor-approved plan to repay over time.
• Company Administration: the rescue route, and the breathing space it buys.
• 30-Second Insolvency Test: confirm where the company actually stands.