The clock is the first thing to understand about a statutory demand. Once the demand is validly served on your company, a 21-day period starts, and at the end of it a creditor owed more than £750 can petition to wind your company up.
One fact trips up directors more than any other, and it changes what you do next. Unlike an individual served with a statutory demand, a companycannot apply to have it set aside. There is no set-aside route in the rules for a company at all.
The only way to stop the demand turning into a petition is toapply to court for an injunction, and the window for that closes when the 21 days expire. Below we set out how the demand works, the grounds that justify an injunction, and what ignoring the clock actually costs.
Statutory Demand Against a Company at a Glance
- What it is: a formal written demand for a debt of more than £750, and the usual first step toward a winding-up petition.
- The clock: your company has 21 days from valid service to pay, secure, or challenge the debt.
- The myth: a company cannot apply to set aside the demand the way an individual can.
- The only lever: apply to court for an injunction restraining a winding-up petition before day 21.
- What is at stake: advertisement in The Gazette, a frozen bank account, and void payments under the Insolvency Act 1986.
What Is a Statutory Demand Against a Company?
A statutory demand is a formal, written demand for payment served by a creditor who says your company owes a clear, undisputed debt. It is not a court order, and no judge signs it. It is a warning shot with statutory teeth.
The demand matters because of what it unlocks. Under section 123 of the Insolvency Act 1986, a company that fails to pay a demanded sum of more than£750 within 21 days is deemed unable to pay its debts. That deeming is the evidence a creditor needs to ask the court to wind the company up.
So the demand is cheap and fast for the creditor. Theydo not need the court’s permission to issue it, and they do not need to prove anything in court first. For your company, that asymmetry is the whole problem.
How a Statutory Demand Against a Company Works
The mechanics are simple, which is what makes them dangerous. Three stages matter: service, the 21-day clock, and the point where a set-aside would exist for an individual but not for you.
Serving the Statutory Demand and the 21-Day Clock
The creditor drafts the demand on the correct form, states the debt and the parties, and serves it on your company. Service is usually made by leaving it at yourregistered office address, so a demand can be validly served even if it never reaches your desk.
From valid service, the 21 days run. Miss that deadline and the creditor can present a winding-up petition the day after it expires. Treat the date of service as the start of a21-day countdown, not a soft target.
Why a Company Cannot Apply to Set Aside a Statutory Demand
An individual served with a statutory demand can apply to court to set it aside, and the demand is suspended while that application is heard.No equivalent route exists for a company. There is nothing you can file that pauses the clock.
This is why copying advice written for personal bankruptcy is costly. If you search for how to set aside a statutory demand and follow the personal procedure, you will burn part of your 21 days preparing an application the court cannot entertain.
Applying for an Injunction to Restrain a Winding-Up Petition
The correct move, where you have grounds, is to apply to court foran injunction restraining the creditor from presenting or advertising a winding-up petition. This is the company equivalent of a challenge, and it is the lever the rules actually give you.
An injunction is granted on grounds, not on request. You need evidence, and you need it inside the 21 days, because once a petition is presented the damage beginsbefore any hearing. We deal with the grounds next.
Grounds to Restrain a Winding-Up Petition After a Statutory Demand
The court will restrain a petition where the demand should not lead to winding up. In our work applying for these injunctions, four grounds do the heavy lifting. Each needs credible evidence, not a bare assertion.
| Ground | What You Must Show |
|---|---|
| Genuine dispute | Substantial evidence that the debt is not owed, or that the amount claimed is wrong. A vague disagreement will not do. |
| Counterclaim | A cross-claim against the creditor equal to or larger than the debt, for example for defective goods or breach of contract. |
| Creditor holds security | The creditor already holds security, such as a charge over property, worth at least as much as the debt claimed. |
| Procedural defect | A defect in how the demand or petition was served, or a significant error in the paperwork itself. |
Whichever ground fits, the evidence has to bedocumentary and contemporaneous. Courts restrain petitions on substance, and they are unimpressed by a dispute invented once the demand lands. The genuine-dispute ground overlaps closely with thecommon defences to a winding-up petition.
What Directors Should Do About a Statutory Demand
Within the 21 days you have four realistic routes, and the right one depends on whether the debt is genuinely owed.
- Pay the debt. If the sum is due and your company can fund it, paying is the cleanest end to the matter and stops the petition outright.
- Negotiate terms. If the debt is owed but unaffordable now, approach the creditor at once and propose a written repayment plan. A signed agreement can support an application to hold the petition off.
- Apply for an injunction. If you have one of the grounds above, instruct advisers to prepare the injunction application inside the 21-day window.
- Take licensed advice. Where the demand signals wider insolvency, speak to a licensed insolvency practitioner, who may recommend acompany voluntary arrangement oradministration to protect the company.
The route you cannot afford is silence. Doing nothing hands the creditor the outcome, because a statutory demand that is neither paid nor challenged isclose to an unanswerable case for a winding-up order.
Risks of Ignoring a Statutory Demand Against a Company
Ignoring a valid demand does not make it lapse; it arms the creditor. Once the 21 days pass, they can present awinding-up petition, the court application to close your company and sell its assets.
Then the timeline hardens. Under the Insolvency (England and Wales) Rules 2016, the petition must wait at leastseven business days before it can be advertised in The Gazette. That gap is your last realistic chance to act.
Advertisement is the moment most directors feel first. Banks monitor Gazette notices, and once your petition appears the company’sbank account is usually frozen, so no payments clear. We cover the freeze in detail in our guide onwhether a winding-up petition freezes a company bank account.
The freeze bites for a legal reason. Undersection 127 of the Insolvency Act 1986, any disposition of company property made after a petition is presented is void unless the court validates it. Pay a supplier after presentation and you may have to account for that money personally.
If a payment genuinely has to be made after presentation, it needs avalidation order from the court first. This is why actingbefore the petition, not after, is the whole game. The cheapest defence is to keep the debt away from petition stage at all, which our guide onhow to avoid a winding-up petition covers.
The practical conclusion is narrow. The one lever that protects your company, the injunction, only worksbefore a petition is presented, which means before your 21 days run out.
So if a demand has landed, get it in front of a licensed insolvency practitioner within days, not weeks. We can assess the debt, test whether a ground to restrain exists, and prepare the application while the window is still open. Call0208 444 3400 or use ourcontact form.
Related Guides
- What Is a Winding-Up Petition?: the process a statutory demand leads to, start to finish.
- Common Defences to a Winding-Up Petition: the arguments that persuade a court to dismiss or restrain a petition.
- How to Avoid a Winding-Up Petition: earlier steps that stop a demand escalating.
- Company Voluntary Arrangement: a formal deal with creditors that can resolve the underlying debt.
Frequently Asked Questions About Statutory Demands Against a Company
Can a company apply to set aside a statutory demand?
No. Unlike an individual, a company has no route to set aside a statutory demand. If your company wants to stop the demand leading to a winding-up petition, it must apply to court for an injunction restraining that petition, and it must do so before the 21-day period ends. Copying the personal set-aside procedure only wastes the time you have.
How long does a company have to respond to a statutory demand?
Twenty-one days from valid service. If the debt, which must exceed £750, is not paid or otherwise resolved within that period, the creditor can present a winding-up petition the following day. Under section 123 of the Insolvency Act 1986 the unpaid demand is treated as evidence that the company cannot pay its debts.
What are the grounds for an injunction to restrain a winding-up petition?
Four grounds carry most applications: the debt is genuinely disputed on substantial grounds; the company has a counterclaim equal to or larger than the debt; the creditor already holds security covering the debt; or there is a real procedural defect in the demand or petition. Each needs documentary evidence, not assertion, and the application has to be prepared inside the 21 days.
What happens to the company bank account if the demand is ignored?
Once the 21 days pass and a petition is presented and advertised in The Gazette, banks that monitor those notices usually freeze the company account. Under section 127 of the Insolvency Act 1986, payments made after presentation are void unless the court grants a validation order, so trading through a frozen account is not a safe workaround.
Is a statutory demand the same as a winding-up petition?
No. The statutory demand comes first and is not a court document. It is the creditor’s formal warning and the evidence base for the next step. The winding-up petition is the court application that follows if the demand is ignored. The gap between the two, your 21 days, is the window in which the outcome is still yours to influence.