You've received a statutory demand: what to do now

A statutory demand arriving is unsettling, and it is meant to be. Don't panic - companies deal with these every week, and there are usually options. But be clear about one thing: the clock is now running, and this is the one document your company must not ignore. The steps you take in the next few days matter more than anything you did in the months before it arrived.

What a statutory demand actually is

A statutory demand is a formal written demand for payment of a debt, made under section 289 of the Companies Act 1993. It is not just another strongly worded letter from a creditor's lawyer. If the company does not comply within the period stated in the demand - usually 15 working days after service - the law presumes the company is unable to pay its debts. That presumption is the legal foundation a creditor needs to apply to the High Court to put the company into liquidation.

In other words, a statutory demand is usually the last formal step before liquidation proceedings. That is why it has to be treated with urgency, even if you dispute the debt or believe the creditor is bluffing.

Your options

1. Pay, secure or compound the debt within the period

If the debt is genuinely owed and the company can pay it, paying within the period stated in the demand brings the matter to an end. The Act also allows the company to give security for the debt, or to compound with the creditor - that is, reach an agreement the creditor accepts, such as a negotiated settlement or payment arrangement - within the same period. Any agreement should be clearly documented before the deadline passes.

2. Apply to the High Court to set the demand aside

If there is a proper basis for challenging the demand, the company can apply to the High Court to set it aside. The most common ground is a genuine and substantial dispute about whether the debt is owing, or a genuine counterclaim or set-off. Two things matter here. First, the application must be filed promptly - generally within 10 working days of service, which is earlier than the compliance deadline. Second, the grounds must be real: a set-aside application is not a device for buying time on a debt that is plainly due. Time limits are strict, so take advice on your specific dates immediately.

3. Take advice on the company's wider position - immediately

In our experience, a statutory demand is often the symptom, not the disease. If the company cannot pay this creditor, it may not be paying others either, and the real question is not "how do we deal with this demand?" but "what is the honest position of this company?" Depending on the answer, the right response might be a negotiated arrangement, a creditors compromise, voluntary administration, or an orderly, director-initiated process rather than one forced on the company by the court. You can read more about your position as a director on our for directors page.

Why speed matters

Every option on the list above gets harder, or disappears entirely, as the deadlines pass. The set-aside window generally closes within 10 working days of service; the compliance period usually ends after 15 working days; and once a liquidation application is filed and advertised, the company's practical options narrow sharply. Acting in the first few days, rather than the last few, is the difference between choosing your path and having one chosen for you.

The first conversation with us is free, confidential and without obligation. In that conversation we will help you work out your exact deadlines, look honestly at whether the debt is disputed or simply unpayable, consider the company's wider financial position, and set out the realistic options in plain English - including, where it is the honest answer, telling you that the business is worth fighting for. Talking to us does not start any formal process, and the decisions remain yours.

Common questions

How long do we have?

The demand itself states the compliance period, which is usually 15 working days from service - but an application to set the demand aside must generally be filed within 10 working days of service, which comes first. Time limits are strict and turn on your specific dates, so take advice on your exact deadlines immediately.

Can a statutory demand be set aside?

Sometimes, but only on proper grounds - most commonly a genuine and substantial dispute about the debt, or a genuine counterclaim or set-off. The application must be made to the High Court promptly. It is not a way to buy time on a debt that is genuinely owed.

What happens if we just ignore it?

If the company does not comply within the stated period, it is presumed unable to pay its debts, and the creditor can apply to the High Court to put the company into liquidation. Ignoring the demand is the one response that makes every other option worse.

This guide is general information only and does not constitute legal, financial or insolvency advice. Statutory demand time limits are strict and depend on the facts of service in each case, so please take advice on your specific circumstances and dates immediately.