Written by Jeremy Boyle
Last Updated: 8 October, 2025A statutory demand is a formal, legally prescribed notice demanding payment of a debt. With strict deadlines and a clear warning of insolvency action, statutory demands send a powerful message: pay now or face the consequences.
For directors, knowing how to use a statutory demand can make the difference between a swift resolution and a costly legal battle. This guide breaks down every stage of the statutory demand process, from choosing the correct form to responding effectively if you’ve received one.
- What is a statutory demand?
- When are statutory demands used?
- Alternatives to statutory demands
- Benefits of statutory demands
- How to issue a statutory demand (step-by-step guide)
- Statutory demand forms - at a glance
- How to respond to a statutory demand (step-by-step guide)
- Grounds to set aside a statutory demand
- What happens if you ignore a statutory demand?
- FAQs about statutory demands
- Contact our statutory demand solicitors today
What is a statutory demand?
More than a warning letter, a statutory demand is a formal, legally recognised demand for payment of a debt under the Insolvency Act 1986. If the debt isn’t paid within the deadline (usually 21 days), the creditor can ask the court to shut down the company or make an individual bankrupt.
Because the consequences are severe, statutory demands must meet all three of the following conditions:
- It must be a set amount: If the amount isn’t fixed and certain, the debtor won’t know what they must pay to stop further action. In most cases, the debt must also be over £750.
- The debt cannot be in dispute: If there’s a genuine disagreement about whether the debt exists or how much it is, that should be resolved in court, not by using insolvency threats.
- It must be due/overdue: The whole point of a statutory demand is to recover money that should have been paid already. If the payment date hasn’t arrived, it’s not fair to demand it early (unless using the form for future debts – more about this later).
The law wants to prevent abuse of statutory demands as a bullying tactic. So, if any one of these three conditions isn’t met, the demand may be set aside, and the creditor could be ordered to pay the debtor’s costs.
As such, it’s strongly recommended to contact an insolvency solicitor before issuing or responding to a statutory demand.
Fact CheckYou can issue a statutory demand for a company debt under £750, but you can’t use it to start winding-up proceedings unless the debt is over that amount. Because of this, statutory demands for smaller debts are rare and may be seen as an abuse of process if there’s no genuine plan to follow up with a petition.
When are statutory demands used?
- Apply immediate pressure on a debtor. For example, where despite repeated reminders, they haven’t paid. A statutory demand shows you’re prepared to take the matter further if payment isn’t made quickly.
- Signal readiness to escalate to court action. Issuing a statutory demand lets debtors know you won’t hesitate to petition for their winding-up if they continue to ignore your invoices.
- Pursue a cost-effective alternative to lengthy litigation. For example, you’ve been chasing a debt for over six months, but you want to avoid the cost of starting formal court proceedings.
Alternatives to statutory demands
A statutory demand is not always the most appropriate or effective route. Especially if the debt is disputed, the amount is small, or you want to preserve a commercial relationship.
Here are some alternatives:
- Negotiation and settlement agreements: Direct, commercial discussions can sometimes achieve a faster and more amicable resolution than legal action.
- Letter before action: A formal letter from a solicitor demanding payment can be a lower-cost first step. This can prompt payment without the more severe consequences of a statutory demand.
- Court claim: If the debt is disputed, issuing a claim through the appropriate court can determine liability. A judgment can then be enforced through methods such as charging orders, attachment of earnings, or bailiff action.
- Mediation or alternative dispute resolution (ADR): If there’s a genuine disagreement over the debt, mediation allows a neutral third party to help reach a compromise.
- Winding-up or bankruptcy petition: In certain circumstances a creditor may petition for insolvency without serving a statutory demand first. This is more aggressive and costly, but it can be effective in urgent cases.
Benefits of statutory demands
When used correctly, a statutory demand combines the authority of a formal legal notice, prompting payment without the need for lengthy proceedings.
Benefits include:
- Fast and cost-effective: Quicker and cheaper to prepare and serve than issuing a full court claim.
- Creates urgency: The strict 21-day deadline forces the debtor to either pay, negotiate, or face serious consequences.
- Powerful deterrent: Many debtors settle promptly rather than risk a winding-up petition.
- Controlled escalation: It doesn’t automatically lead to insolvency; if the debt is paid or successfully challenged, the process ends there.
How to issue a statutory demand (step-by-step guide)
Issuing a statutory demand is a precise process. Get it right and it can be a fast, cost-effective way to recover what you’re owed. Get it wrong and you risk the demand being thrown out, or even having to pay the debtor’s costs.
A solicitor can guide you through the process, making sure the demand is valid.
Confirm the debt qualifies for a statutory demand
First, confirm the debt qualifies for a statutory demand. If any of the required conditions are not met, a statutory demand is unlikely to be the right enforcement tool.
Choose the correct statutory demand form
GOV.UK provides four official statutory demand forms. Knowing which one to use is essential.
Regardless of the form used, every statutory demand must clearly warn that failure to comply can lead to winding‑up or bankruptcy, and specify the compliance period (usually 21 days). Missing or unclear warnings can be grounds for challenge.
Complete the form precisely
Complete the form with absolute precision, following the official instructions word-for-word. Even small mistakes can render the statutory demand invalid. Make sure you use the exact registered company name and address, and specify the precise sum owed, including any lawful interest that applies.
Serve the demand lawfully
Keeping proof of service is essential. Without this, the debtor could argue they were never served, which can derail your case and delay enforcement.
- For companies: Deliver the statutory demand to the company’s registered office address as listed at Companies House. You do not need to hand it to a specific individual, but you must ensure it physically reaches the premises.
- For individuals: The demand should be personally handed to the debtor wherever possible. If this is not possible despite reasonable efforts, you may be able to serve it by alternative methods. This should only be done in accordance with Insolvency Rules and, ideally, after taking legal advice.
Wait for compliance or escalation
Once the statutory demand is served, the debtor has 21 days to:
- Pay in full
- Agree on a settlement plan with the creditor; or
- Apply to set aside the statutory demand.
If they fail to act, you may move forward with a winding-up petition.
Statutory demand forms - at a glance
The UK Government provides four official statutory demand forms, each tailored to a specific type of debt and debtor. Using the wrong form is a common reason for a statutory demand being set aside.
| Form | Purpose | Example |
| SD1 | Demand immediate payment of an undisputed debt from a limited company where that debt is due. | You supplied £80,000 worth of goods to a limited business, and the invoice is overdue. |
| SD2 | Demand immediate payment when an individual or other non-limited entity owes you an undisputed debt due immediately. | A sole trader owes you £12,000 for consultancy services. |
| SD3 | Demand the payment of a fixed and certain debt payable at a future date (e.g. under a contract) | A company is contractually due to pay you £50,000 on 1 December. It’s September, and they’ve said they won’t pay. |
| SD4 | Demand payment of a debt payable immediately after court judgment. | You won a County Court Judgment (CCJ) for £18,000 against a company, and they still haven’t paid within the court’s time limit. |
How to respond to a statutory demand (step-by-step guide)
Act immediately
Do not ignore the demand. The process is designed to be fast and unforgiving, and inaction could lead to a winding-up petition (for companies) or bankruptcy petition (for individuals). Seek legal advice within 24–48 hours of receiving it to maximise your options.Review the demand
Examine every detail as even minor technical errors can be important. Things to check include:- Is the debt accurate? Check the amount, interest calculations, and whether the payments you’ve made have been accounted for.
- Was the correct form used? An incorrect form may be grounds for setting the demand aside.
- Was it served properly? Incorrect service can invalidate the demand. keep both the envelope (if delivered by post) and any covering letters, and note the date and method of delivery.
Decide on your strategy
Once you’ve confirmed the facts, decide how to respond. If the demand is valid and you have no defence, your best option may be to pay the debt in full or negotiate a settlement. If the demand contains errors or the debt is disputed, you could apply to set it aside.Apply to set aside (if justified)
If there are valid grounds, individuals can apply to set aside the statutory demand within 18 days of it being served. The application will need to be supported by evidence. The court will then schedule a hearing where you or your solicitor will explain your case.
Grounds to set aside a statutory demand
- Where there is a genuine dispute over the debt
- Where the wrong form was used or there are procedural errors
- Where the payment date hasn’t arrived (unless an SD3 form for future debts was used)
- Where you have a counterclaim against the creditor, equal to or greater than the amount they claim.
What happens if you ignore a statutory demand?
- For a company: If the winding-up petition is granted, the company could be forced into compulsory liquidation, its bank accounts frozen, and control handed to a liquidator. This process is public, often damaging relationships with suppliers, customers, and lenders before it even concludes.
- For individuals: A successful bankruptcy petition could see your assets sold to repay the debt, and you may face significant restrictions on your financial affairs for several years.
FAQs about statutory demands
Costs generally include drafting by a solicitor (several hundred pounds), plus service via process‐server or courier (£20–£100). Overall, issuing a statutory demand is relatively low-cost, but it can become expensive if contested or escalated.
Yes. A creditor can withdraw or cancel a statutory demand by sending written notice to the debtor. Withdrawal confirms the debt obligation has been satisfied or otherwise resolved.
Generally, statutory demands are not filed on public credit files. However, if they lead to a winding-up petition and it proceeds, insolvency records become public, and that can impact creditworthiness.
A statutory demand takes effect from the moment it is served on the debtor. It remains in force until the debt is resolved or the demand is formally removed. The most critical period is the first 21 days.
Your response can determine whether the matter is resolved quickly or escalates into a full-blown legal battle.
- Every day counts. Seeking legal advice early will ensure you take the right action from the start.
- Check the details, the amount, and whether the correct statutory demand form has been used.
- If the debt is undisputed and you can pay, doing so avoids further costs and action.
- Review whether you have legal reasons to challenge the demand and, if so, apply to the court within the deadline.
Stopping a statutory demand means cutting off the creditor’s ability to use it as a springboard for insolvency proceedings. The options depend on your situation and the nature of the debt, but the aim is always to remove the legal basis for escalation. Your solicitor can advise you on your options.
Once a statutory demand is set aside, it is as if it never existed. It can no longer be used as the basis for bankruptcy or winding-up proceedings. The case effectively ends, unless the creditor chooses to pursue the debt through another legal route.
Contact our statutory demand solicitors today
At Summit Law, we know statutory demands can be both a powerful recovery tool and a serious threat if you’re on the receiving end. Our expert statutory demand solicitors act quickly to protect your position:
- Rapid action: Once appointed, we can act within hours to safeguard your interests.
- Specialist advice: Our team advises on all aspects of statutory demands, from form selection to service and set-aside applications.
- Clear strategy: We provide straightforward, commercial guidance on your best options, the likelihood of success, and the potential costs involved.
- Proven results: We have an established track record in successfully issuing demands that prompt payment and defending against those that are flawed or unjustified.
Time is critical when dealing with statutory demands. For your free initial consultation, contact us today on 020 7467 3980 or complete the website enquiry form.
