Short answer: a statutory demand is a formal insolvency document (Form SD1 for a company) demanding payment of an undisputed debt of £750 or more within 21 days. If the company does not pay or secure the debt, the creditor can petition to wind it up. It is powerful against a solvent company that is simply refusing to pay, but it is the wrong tool for any debt that is genuinely disputed.
Most unpaid business invoices are resolved through reminders, a letter before action, a collection agency or a county court claim. A statutory demand sits outside that sequence. It is a step under insolvency law, and it carries real consequences for both sides. This guide explains what a statutory demand is, when it is appropriate for a business debt, and the risks of getting it wrong.
Debt Collection UK is a trading name of PASECOM GROUP LTD. We introduce unpaid invoices owed by limited companies, LLPs and PLCs to independent partner agencies, who collect. We are not solicitors or insolvency practitioners, and we are not authorised by the FCA. This is general information, not legal advice.
What is a statutory demand?
A statutory demand is a written demand, in a prescribed form, for payment of a debt. For a company debtor in England and Wales, the form is SD1, and the rules are in the Insolvency Act 1986 and the Insolvency (England and Wales) Rules 2016. GOV.UK’s statutory demands guidance explains the forms and how to serve them.
The demand is served on the company, usually by delivering it to the registered office. The company then has 21 days to pay the debt, secure it, or reach a settlement to the creditor’s satisfaction.
What happens after the 21 days?
Under section 123 of the Insolvency Act 1986, a company that fails to pay, secure or compound a debt of £750 or more within 21 days of a properly served statutory demand is deemed unable to pay its debts. That allows the creditor to present a winding-up petition to the court.
A statutory demand does not itself lead to a judgment or to enforcement. It is the step that opens the door to a petition. You do not need a judgment first to serve one, although an unsatisfied judgment is another way to show inability to pay.
Why is a winding-up petition such a serious step?
A petition asks the court to put the company into compulsory liquidation. Once it is advertised, banks may freeze the company’s accounts, and suppliers and customers may react. That pressure is why some solvent companies pay quickly when a petition is threatened or presented.
But a petition has costs: a court fee and an official receiver’s deposit, set out on GOV.UK. If the company is wound up, a liquidator takes control of its assets for the benefit of all creditors, and you rank as one unsecured creditor among many. You may recover little or nothing.
When can you use a statutory demand?
A statutory demand is typically considered only when all of the following apply:
- The debtor is a company (or LLP), not an individual.
- The debt is £750 or more and is due now.
- The debt is not genuinely disputed on substantial grounds.
- The company appears solvent, or you are prepared for it to be wound up.
- Other steps, such as a letter before action, have not worked.
Why should you not use a statutory demand on a disputed debt?
The courts are clear that insolvency proceedings are not a way to collect a debt that is disputed in good faith and on substantial grounds. If a company has a real dispute and you threaten or present a petition, it can apply to the court for an injunction to stop it. The creditor can then be ordered to pay the company’s legal costs. A company cannot apply to set aside a statutory demand in the way an individual can, so disputes tend to be fought at the petition stage, where the stakes are higher.
If there is any real argument about the quality of work, the price or what was agreed, use a letter before action and, if needed, a county court claim instead. See statutory demand vs letter before action.
What should a statutory demand include?
The SD1 form sets out the required content. In broad terms it must identify the creditor and the company, state the amount of the debt and how it arises, and explain the consequences of not complying. Any interest or charges must be shown separately and be properly claimable. On a qualifying commercial debt, that can include statutory interest at 8% above the Bank of England base rate and fixed compensation under section 5A of the Late Payment of Commercial Debts (Interest) Act 1998. Errors in the figures or service can undermine the demand.
Is it worth doing it yourself?
You can complete and serve a statutory demand yourself, and GOV.UK publishes the forms. But because the next step is a winding-up petition, with costs and a risk of an adverse costs order if things go wrong, many creditors take advice from a solicitor or insolvency practitioner first. Check:
- the company’s exact name, number and registered office on Companies House;
- that no insolvency notice has already appeared in The Gazette;
- that you have clear proof of the debt and no record of a genuine dispute.
How does this fit with a collection agency?
For most undisputed invoices owed by a trading company, a letter before action followed by a partner agency is a more proportionate first step. The agency contacts the company, negotiates and, if that fails, can explain the options, which may include a county court claim or, in a suitable case, insolvency routes with a solicitor. Nothing is filed without your instruction, and court or insolvency costs are separate from the agency’s commission.
The calm sequence for most company debts is: reminders, then a letter before action under the Practice Direction – Pre-Action Conduct and Protocols with 14 days to reply, then an agency or a claim, with a statutory demand reserved for clear cases.
Frequently asked questions
What is the minimum debt for a statutory demand against a company?
The debt must be £750 or more for the winding-up ground in section 123 to apply.
How long does the company have to pay?
21 days from service.
Do I need a CCJ first?
No. A statutory demand can be served without a judgment, but it must be for an undisputed debt.
Can I serve a statutory demand on a sole trader?
Individuals use a different form and a bankruptcy route with different thresholds. We only accept limited company, LLP and PLC debtors.
Prefer a proportionate first step?
If the debtor is a limited company, LLP or PLC and the invoice is undisputed, upload it using the form below, or use our statutory demand money page or winding-up petition guide when you are deciding whether insolvency pressure or partner collection comes first. We introduce it to an independent partner agency. The fixed fee is 15% of what is recovered, only when you are paid. Recovery is not guaranteed.