A statutory demand is a formal written demand for payment that a creditor can serve on a company that owes it money. If the company does not pay or agree terms within 21 days, the creditor can ask the court to wind the company up. For a creditor chasing an unpaid invoice, it is the step that comes before a winding-up petition.
When a creditor can use one
- Anyone owed money can make a statutory demand, and you do not need a lawyer.
- To wind up a company afterwards, the debt must be at least £750.
- The debt should not be in genuine dispute: a demand for an invoice the customer is contesting usually fails.
- You cannot usually make one for a debt more than six years old.
How to make and serve it
- Fill in form SD 1, "Demand immediate payment of a debt from a limited company", from gov.uk.
- Deliver it to the company's registered office, or its main place of business if it has no registered office. You can also hand it to a director, the company secretary, a manager or another principal officer, or use a process server. Post is only for when it cannot be delivered in person.
- Keep a copy, and proof of when and how it was served.
What the company can do
The company has 21 days to pay the debt or agree a way to pay it. It cannot ask the court to set a statutory demand aside, as an individual can. If it disputes the debt, it can instead apply to the court to stop the creditor from presenting a petition.
If the company does not pay
Once the 21 days have passed, you can apply to wind the company up. You have four months to do so; if you are later than that, you have to explain the delay to the court. Presenting a petition costs money: see what a winding-up petition costs a creditor before you decide.
Check first whether another creditor has already petitioned. If one has, you can support that petition rather than present your own. Check a company for a winding-up petition for free.
Why a demand often works on its own
Many companies pay once they receive a statutory demand, because they know a petition can follow and a petition is advertised in The Gazette, after which their bank usually freezes their accounts. A company that still does not pay after 21 days is giving you useful information: it either disputes the debt or cannot pay it.
To hear about the next customer in trouble before you have to chase, put your accounts on insolvency alerts: you get an email the day a petition, administration or liquidation notice names one of them.
General information about the law of England and Wales, not legal advice. Scotland and Northern Ireland have their own rules for some of these steps.