What is a statutory demand?

A creditor, an assignee of the debt, or an agent acting with documented authority can issue a statutory demand for a company debt. It suits debts that are due and payable, not genuinely disputed, and at or above the statutory minimum, where negotiation, payment plans or deeds of deferral have failed and the creditor expects to use non-payment as the basis for a winding-up application.

It is not a simple letter of demand. Issuing one over a debt that is genuinely disputed on substantial grounds risks it being set aside with adverse costs, so creditors check the debt trail first. The alternatives a creditor usually weighs first are a letter of demand, a payment plan, or court proceedings for the debt itself.

The demand must state the amount claimed and when it fell due, demand payment of that sum, set out the company's options (pay, apply to set aside or negotiate), state the compliance period and be signed by the creditor, its solicitor or an authorised agent. Unless the debt is a judgment debt, an affidavit must accompany it, verifying where the debt came from, how it was calculated, the creditor's entitlement, any earlier recovery attempts and any security, set-offs or payments, with contracts, invoices and payment records attached.

The demand and affidavit are served together by a lawful, provable method: personal service, leaving it at the registered office or a prescribed postal method. Postal receipts, an affidavit of service and contemporaneous delivery records matter, because if service is disputed the court examines the evidence closely.

A company served with a demand has 21 days from service to pay the debt in full, negotiate a written agreement with the creditor, or apply to the court to set the demand aside. Asking for more time does not extend the 21 days: only the court can extend it, and only once a set-aside application has been filed and served within the period. A creditor can withdraw a demand, which is not an extension. Doing nothing is the dangerous option: a valid, unanswered demand lets the creditor file a winding-up application and seek a liquidator.

Courts set demands aside for a genuine dispute about the existence or amount of the debt, an offsetting claim, a defective demand (wrong amount, missing affidavit, unsigned), a debt that belongs to a director rather than the company, a debt already paid, or a stay such as arbitration. Each ground needs specific evidence: contracts, emails, reconciliations and sworn affidavits. Directors also need to review the company's solvency, and unsuccessful applicants can face costs orders.