What is a Statutory Demand?

Julie Palmer

Regional Managing Partner

Updated

9 June 2026

A statutory demand is a formal request for payment from a creditor when your company has failed to pay what it owes. Unsecured creditors generally use this as a last resort when they are owed a significant amount of money, and it represents one of the most serious threats that a creditor can make against your business.

A creditor can issue a statutory demand if they are owed £750 or more and they have previously attempted to collect their money without success. This process requires no court involvement, and is often used by creditors such as HMRC to collect their debts quickly.

"A statutory demand is the clearest possible signal that a creditor has lost patience and is prepared to escalate the matter. If you act quickly, there’s usually room to negotiate, propose a repayment plan, or explore formal restructuring options. If you have received a statutory demand, the single most important thing you can do is seek advice from a licensed insolvency practitioner who can help you understand your options."
- Julie Palmer, Partner, BTG Begbies Traynor

What happens after a statutory demand has been issued?

If the statutory demand remains unpaid and unanswered, there is a high chance that a winding up petition could follow. This is likely to lead to the compulsory liquidation of your company, should the petition be approved by the court.

Any company director in receipt of a statutory demand will benefit greatly from the knowledge and expertise of a professional Insolvency Practitioner. BTG Begbies Traynor operates from offices around the UK, and can offer advice on how to respond to the threat of legal action against your company.

If action is not taken swiftly to rebuke the demand for payment, the sequence of events that follows could result in the liquidation of your business. In the vast majority of cases, a Statutory Demand simply precedes further serious legal action against the delinquent company.

Statutory demand timeline

You have 21 days in which to act to set aside the demand.

The probable course of events is described below:

• A creditor petitions the court to wind up the company, citing non-payment of the statutory demand as their reason
• The winding up petition is advertised in the Gazette
• As banks check the Gazette for notice of insolvent companies, your business bank accounts will be frozen
• Other creditors may hear about the company’s financial position, and begin their own legal action
• Following the winding up petition, the court can issue a winding up order which sets in motion the compulsory liquidation of company assets in order to meet creditor demands
• Following liquidation, your business will cease to exist

What happens if you can't pay the statutory demand?

If you have received a statutory demand and you are unable to pay the creditor what you owe, the good news is that you still have options but you need to act quickly. Here are the options you can consider for your situation:

• Negotiate a payment plan with the creditor. Contact the creditor and propose a realistic repayment arrangement. Many creditors will accept this rather than incur the cost and delay of issuing a winding up petition. The key is to approach them with a clear proposal backed by financial evidence, not just a request for more time. If you do not feel comfortable doing this yourself, a licensed insolvency practitioner will be able to draw up a payment proposal and present this to your creditor on your behalf
• Propose a Company Voluntary Arrangement (CVA). If the company has multiple creditors and the debts are unmanageable, a CVA allows you to propose a formal repayment plan that encompasses all your company's unsecured debt, including the statutory demand creditor. If approved, it prevents any individual creditor from pursuing further legal action.
• Apply for an injunction to prevent a winding up petition. If you have grounds to believe the creditor is using the statutory demand improperly, for example, to pressure you into paying a disputed amount, you can apply to court for an injunction preventing them from presenting a winding up petition. This is only an option if the debt is genuinely disputed; you cannot use this as a way to delay the process.
• Enter a CVL before the creditor petitions. If your company is insolvent and cannot be rescued, entering a Creditors’ Voluntary Liquidation before a winding up petition is filed gives you more control over the process and typically leads to a better outcome for both directors and creditors than compulsory liquidation.

“In most of the statutory demand cases we deal with, the debt isn’t disputed; the issue is that the director simply cannot pay. The question isn’t ‘can we challenge it?’ but ‘what’s the best way to deal with it?’ In many cases, a phone call to the creditor, backed by a realistic payment proposal, resolves the situation entirely. Simply put, creditors just want their money back, and we are here to help you find a solution."
- Julie Palmer, Partner, BTG Begbies Traynor

Can you cancel a statutory demand?

‘Setting aside’ a Statutory Demand means having it cancelled by the court. Several elements of the demand need to be carefully checked, including the legitimacy of the specified debt – whether it is correct in full or only in part, and if the required legal procedures have been followed by the sender.

Not adhering to specific rules and regulations could render the demand invalid. It must be presented on a Statutory Demand Form 4.1, and delivered to the company’s registered address in one of the following ways:

• By hand
• By registered post
• Signed for by an officer of your business.

Just as the creditor must complete the correct forms and serve the demand in a given format, you as the recipient need to make sure that you also use the prescribed forms in challenging the situation.

There must be a genuine dispute to be able to challenge the demand. Sometimes a creditor may considerably ‘inflate’ the cost of their labour or time within an invoice, and if it comes to light that the debt was in genuine dispute, the creditor could face accusations of abusing court process.

Some creditors use Statutory Demands in the hope that debtors will succumb to pressure and the threat of liquidation. If, however, there is only a small mistake in the amount owing, the Statutory Demand is unlikely to be set aside.

The value of receiving professional help in these circumstances cannot be underestimated. It would be a travesty if your company was liquidated simply because you failed to comply with administrative requirements.

We are the UK’s market leader in corporate recovery, and can assist at every stage of this process.

What are valid reasons for reversing a Statutory Demand?

You may be successful in having the demand rescinded if one or more of the following are true:

• The amount stated in the demand is in dispute, or is less than £750
• The creditor holds security equalling or exceeding the debt
• You are paying by instalments and have not reneged on any payments
• You are owed money by the creditor
• The demand was made in error
• The creditor failed to use the correct forms and/or required method of serving the demand.

If your challenge is accepted by the court, a hearing will be called to discuss the debt and the payment deadline suspended pending this hearing. Should your application be successful, the demand will be rescinded and the creditor will face liability for all court costs.

BTG Begbies Traynor can advise your company on the best course of action to take on receipt of a Statutory Demand. We have more than 100 local offices and offer a same day consultation.