Statutory Demand

A statutory demand is a formal written demand for payment of a debt, and is one of the mechanisms creditors use to trigger insolvency proceedings under the Insolvency Act 1986. Anyone owed money can serve a statutory demand, and gov.uk guidance confirms that a lawyer is not required to do so, since the process is designed to be usable directly by creditors. The demand can be made against either an individual debtor or a company, provided the debt is not disputed and, generally, is not more than six years old.

Once served, the debtor has a fixed window to respond. Gov.uk guidance states that the individual or company that owes the money has 21 days to either pay the debt or reach an agreement to pay before the creditor can escalate matters. If the debtor does nothing within that period, the creditor's next step is to apply to make the debtor bankrupt or to wind up the company, rather than the statutory demand itself achieving payment.

The underlying statutory thresholds differ for companies and individuals. For a company, section 123 of the Insolvency Act 1986 deems a company unable to pay its debts where a creditor is owed a sum exceeding £750 and has served a written demand which the company has for 3 weeks thereafter neglected to pay or otherwise secure or compound to the creditor's satisfaction. For an individual debtor, the equivalent bankruptcy threshold, known as 'the bankruptcy level', is set by section 267 of the Act, and section 268 requires that at least 3 weeks have elapsed since the demand was served and that the demand has been neither complied with nor set aside before the debtor is treated as unable to pay.