Statutory demands explained

June 2026

A statutory demand is a formal written notice served by a creditor requiring a company to pay an undisputed debt that is due and owing.

Statutory demands are issued pursuant to the provisions of the Companies Act 1993 and can ultimately lead to the liquidation or “winding-up” of the debtor company if not complied with.

Once a statutory demand has been served, the recipient company only has a short period of 10 working days to apply to the High Court to set aside the demand if they consider it to be defective in some way, or 15 working days to pay the debt in full or otherwise make satisfactory arrangements with the creditor.

Failure by a debtor company to comply with a statutory demand within the prescribed period gives rise to a legal presumption that the company is unable to pay its debts and is therefore insolvent. The creditor issuing the statutory demand has a period of 30 working days after the last date for compliance with the demand to apply to liquidate the company, if necessary.

A powerful tool for creditors

Strictly speaking, a statutory demand is not a debt collection tool but instead a means of establishing that a company is unable to pay its debts as a precursor to a liquidation application being commenced.  Given the far-reaching consequences of non-compliance, statutory demands can be a very useful tool in obtaining payment from companies, and the courts generally recognise the practical basis upon which they are deployed by creditors.

Proceeding with a statutory demand in circumstances where there is known to be a genuine dispute in relation to the debt will likely result in a successful application to set aside the demand, together with significant costs liability for improper use of the demand procedure.  It is therefore important to seek legal advice if you are considering issuing a statutory demand upon a company, as there can be severe consequences for getting it wrong.

If your company receives a statutory demand

If you are served with a statutory demand, you should seek legal advice immediately as the timeframes for responding are short and inflexible.

We can discuss the situation with you, consider whether there are any grounds for applying to set aside the demand, and if appropriate negotiate with the creditor to either seek withdrawal of the demand or a mutually agreeable compromise.

How we can help

Our litigation team regularly advises clients with both issuing and responding to statutory demands. Contact us today for an initial discussion regarding your situation.