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 company cannot apply to have it set aside. There is no set-aside route in the rules for a company at all.
If the debt is owed, the company stops the demand turning into a petition by paying it, or by securing or compounding it to the creditor’s reasonable satisfaction, within the 21 days. If the debt is genuinely disputed, the route is to apply to court for an injunction restraining a petition; do it within the 21 days if you can, but the right does not end on day 21. 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.
- No set-aside: unlike an individual, a company cannot apply to set aside the demand.
- The levers: pay, secure or compound an owed debt within 21 days; for a genuinely disputed debt, apply to court for an injunction restraining a winding-up petition, ideally 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 is deemed unable to pay its debts if, for 21 days after service, it neglects to pay a demanded sum of more than £750 or to secure or compound for it to the creditor’s reasonable satisfaction. That deeming gives a creditor ready-made evidence to ask the court to wind the company up. A creditor can also petition without a demand, by proving in other ways that the company cannot pay its debts.
So the demand is cheap and fast for the creditor. They do 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 your registered 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 a 21-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 for an injunction restraining the creditor from presenting or advertising a winding-up petition. This is the company’s nearest equivalent of a challenge. The Insolvency Rules do not give it to you: it is relief the court can grant under its general powers.
An injunction is granted on grounds, not on request. You need evidence, and you should apply inside the 21 days if you can, because once a petition is presented the damage begins before any hearing. Day 21 is not a legal bar: until a petition is presented the company can still apply, and after presentation it can apply to restrain advertisement and oppose the petition at the 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, two grounds do the heavy lifting, and a procedural defect rarely works on its own. 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. |
| Procedural defect | A defect in the demand or its service may stop the creditor relying on the demand as proof of insolvency. It is rarely enough where the debt itself is undisputed, and formal defects only invalidate proceedings if they cause substantial injustice the court cannot cure. |
Whichever ground fits, the evidence has to be documentary 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 the common 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 a company voluntary arrangement or administration 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 is close 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 a winding-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, unless the court directs otherwise, notice of the petition must not be advertised in The Gazette until at least seven business days after the petition is served on the company, and it must appear at least seven business days before the hearing. That gap after service 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’s bank account is usually frozen, so no payments clear. We cover the freeze in detail in our guide on whether a winding-up petition freezes a company bank account.
The freeze bites for a legal reason. Under section 127 of the Insolvency Act 1986, if a winding-up order is made, any disposition of company property made after the petition was 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, apply to the court for a validation order before paying. The court can validate a payment after the event, but it may refuse. This is why acting before 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 on how to avoid a winding-up petition covers.
The Risk to You as a Director
The risk does not stop at the company. If the petition ends in a winding-up order, the Official Receiver or the liquidator must look at how the company was run before it failed and report on the directors’ conduct to the Insolvency Service, which acts for the Secretary of State. Three separate consequences can follow.
Wrongful trading. This is a civil liability under sections 214 and 246ZB of the Insolvency Act 1986, not a criminal offence. It can arise where a director carried on trading after the point at which they knew, or ought to have concluded, that there was no reasonable prospect of avoiding insolvent liquidation or administration. The court can then order the director to contribute to the company’s assets. A demand the company could not pay is the kind of fact a liquidator looks at when deciding where that point fell.
Disqualification. Under the Company Directors Disqualification Act 1986, a director whose conduct makes them unfit to be concerned in the management of a company can be disqualified for between two and 15 years.
Personal guarantees. If you have personally guaranteed a company debt, such as a bank loan, an overdraft or a lease, the lender or landlord can pursue you for it once the company cannot pay. Liquidation does not cancel the guarantee.
None of this makes you liable simply because the company is insolvent. What changes is how you must weigh your decisions. Once you know, or ought to know, that the company is insolvent or bordering on insolvency, you have to consider the interests of creditors as a whole, and the weight they carry grows as the position worsens. A demand you cannot pay is often the first clear sign that this duty applies, so record your decisions and take advice early.
The practical conclusion is narrow. Where the debt is disputed, the injunction does most good before a petition is presented, which means acting before your 21 days run out. After presentation the company can still seek to restrain advertisement and oppose the petition, but by then the damage has started.
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. Call 0208 444 3400 or use our contact 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 the debt is owed, the company stops the demand by paying it, or by securing or compounding it to the creditor’s reasonable satisfaction, within the 21 days. If the debt is genuinely disputed, it can apply to court for an injunction restraining a petition, ideally within the 21 days; after a petition is presented it can still seek to restrain advertisement and oppose the petition at the hearing. 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, a company that neglects for three weeks to pay, secure or compound the demanded debt is deemed unable to pay its debts.
What are the grounds for an injunction to restrain a winding-up petition?
Two grounds carry most applications: the debt is genuinely disputed on substantial grounds, or the company has a genuine counterclaim or set-off equal to or larger than the debt. A procedural defect in the demand is rarely enough on its own where the debt is undisputed, because formal defects only invalidate proceedings if they cause substantial injustice the court cannot cure. Each ground needs documentary evidence, not assertion, and the application is best 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, if a winding-up order is made, 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.