You have 21 days from the date of service to respond to a statutory demand. After this period, the creditor can apply to wind up your company.
What is a Statutory Demand?
A statutory demand is a formal written demand for payment of a debt under the Insolvency Act 1986. It can be served on a company by any creditor owed more than £750. It is not a court order, but it is a precursor to one. If the demand is not satisfied, disputed, or otherwise dealt with within 21 days, the creditor can apply to the court for a winding-up order.
Statutory demands are commonly issued by HMRC, banks, suppliers, landlords, and other commercial creditors. They are a serious escalation in the debt recovery process and should never be ignored.
Your 21-Day Action Plan
Can You Dispute a Statutory Demand?
Yes. If you believe the debt is not owed, is disputed on genuine grounds, or has already been paid, you can apply to the court to have the statutory demand set aside. You must make this application within 18 days of service. The court will consider whether there is a genuine dispute about the debt and whether it would be unjust to allow the demand to stand.
Disputing a statutory demand requires legal expertise and should be handled by a solicitor or insolvency practitioner with experience in this area.
What if the Debt is Genuine?
If the debt is genuine and the company cannot pay, the most important thing is to act proactively. Options include negotiating a payment plan with the creditor, entering a Company Voluntary Arrangement (CVA), or initiating a Creditors' Voluntary Liquidation (CVL). Taking proactive steps before a winding-up petition is filed gives directors significantly more control over the outcome.