Glossary · UK
What is Statutory Demand?
A formal written demand for payment of an undisputed debt of at least £5,000 (for an individual), giving the debtor 21 days to pay or reach agreement before the creditor can petition for bankruptcy, or 3 weeks before a company can face a winding-up petition.
Full Definition
A statutory demand is a formal legal document a creditor can serve on a debtor demanding payment of a debt, and it is often the first formal step toward bankruptcy proceedings against an individual, or a winding-up petition against a company. For an individual debtor, a statutory demand can be used where an undisputed debt of at least £5,000 is owed and there is no genuine dispute about the amount or a cross-claim that would offset it; for a company, statutory demands are used for debts of £750 or more as a precursor to a winding-up petition. The demand must be served in the correct form, clearly setting out the amount owed, how it arose, and the consequences of not responding. Once validly served, the debtor has 18 days to apply to set the statutory demand aside (if there are valid grounds, such as a genuine dispute over the debt, a cross-claim, or a procedural defect in how it was served) and, if not set aside, 21 days from service in total before the creditor becomes entitled to present a bankruptcy petition (for an individual) or winding-up petition (for a company) on the basis that the debtor has failed to comply. Simply ignoring a statutory demand is risky: if the debtor does neither pay nor successfully apply to set it aside within the time limits, the creditor can proceed straight to a bankruptcy or winding-up petition without needing to prove anything further about the debtor's general solvency, since an unanswered statutory demand is itself treated as evidence the debtor cannot pay their debts as they fall due. Worked example: a creditor is owed £8,000 by an individual under a personal loan agreement that has gone unpaid for over a year, with no dispute about the amount owed; the creditor serves a statutory demand, and the debtor, having no genuine grounds to dispute the debt and no funds to pay it, takes no action within the 21-day period; the creditor can then present a bankruptcy petition to the court, and because the statutory demand was correctly served and went unanswered, the court is likely to make a bankruptcy order on the basis that non-payment of a validly served statutory demand is sufficient evidence of inability to pay debts, without the creditor needing to separately prove the debtor's overall financial position.