A statutory demand is often described as a quick way to get an invoice paid. It is more accurately the first formal step towards insolvency proceedings. This guide, for business owners and freelancers in England and Wales, explains what a demand does, what it leads to, and where it goes wrong. See also your options on an unpaid invoice.
What a statutory demand is, and is not
A statutory demand is a written demand for payment in a form prescribed under the Insolvency Act 1986. The creditor completes it and serves it. No court issues it: in the words of the Insolvency Practice Direction, 'A statutory demand is not a Court document'.
It is not a court claim and it does not produce a judgment. If the demand is not met, the debtor is treated as unable to pay its debts, which is the ground on which a creditor asks the court to wind up a company or make an individual bankrupt.
GOV.UK also notes that a statutory demand cannot usually be made for a debt more than six years old.
Against a company
Under section 123(1)(a) of the 1986 Act a company is deemed unable to pay its debts if:
- a creditor is owed a sum 'exceeding £750 then due' (at the time of writing, October 2026);
- the creditor has served a written demand in the prescribed form 'by leaving it at the company's registered office'; and
- the company has 'for 3 weeks thereafter neglected to pay the sum or to secure or compound for it to the reasonable satisfaction of the creditor'.
To secure a debt is to give security for it; to compound is to settle it.
The form is SD1. Rule 7.3 of the Insolvency (England and Wales) Rules 2016 sets out what it must contain, including the amount of the debt and how it arose, and a statement that the company must pay within 21 days of service, after which the creditor may present a winding-up petition. Interest the company has not previously been notified of, and any other accruing charge, must be identified separately, with the amount or rate and the grounds for claiming it.
An unmet demand allows the creditor to present a winding-up petition, an application for the court to order the company's compulsory liquidation, on the ground that it is unable to pay its debts (section 122(1)(f)). A demand is not the only way to show that: section 123 also covers a judgment on which enforcement has been returned unsatisfied.
Against an individual or sole trader
A sole trader is an individual, so the route is bankruptcy rather than winding up. Under section 267 a creditor's petition may be presented only if the debt equals or exceeds the bankruptcy level, which is £5,000 at the time of writing (October 2026), is for a liquidated (fixed) sum, is unsecured, and is one the debtor appears unable to pay or to have no reasonable prospect of paying. Under section 268 the debtor appears unable to pay a debt that is payable immediately if a statutory demand has been served, at least three weeks have passed, and the demand has been neither complied with nor set aside.
GOV.UK lists three forms: SD2 for a debt payable now, SD4 for a debt payable now following a judgment or court order, and SD3 for a debt payable in the future.
How a demand must be served
A company demand is left at the registered office, as the Act requires.
For an individual, rule 10.2 requires the creditor to 'do all that is reasonable to bring the statutory demand to the debtor's attention and, if practicable in the particular circumstances, serve the demand personally'. GOV.UK says a demand can be sent by registered post or put through a letterbox only if it cannot be delivered in person, and that the creditor must keep a copy and proof of when it was served. If a bankruptcy petition follows, a certificate of service verified by a statement of truth must be filed with it (rule 10.3).
GOV.UK says a creditor has four months to apply to wind up or bankrupt the debtor, and must explain any delay to the court.
How a demand is challenged
An individual may apply to the court to set the demand aside. The application must be made within 18 days from the date of service, and time for complying with the demand stops running when it is filed (rule 10.4). Under rule 10.5(5) the court may set the demand aside if:
- the debtor appears to have a counterclaim, set-off or cross demand which equals or exceeds the debt;
- the debt is disputed on grounds which appear to the court to be substantial;
- the creditor holds security that was not properly dealt with in the demand, or that covers the debt; or
- the court is satisfied on other grounds that the demand ought to be set aside.
A company cannot apply to set a demand aside. Its remedy is an injunction (a court order) restraining the creditor from presenting a winding-up petition, or from giving public notice of one (rule 7.24).
Why a disputed debt is the wrong subject
In Angel Group Ltd v British Gas Trading Ltd [2012] EWHC 2702 (Ch) the High Court summarised the principles: a company may challenge the petitioner's standing by advancing in good faith a substantial dispute about the whole debt, or enough of it to bring the undisputed part below £750. It is not the court's practice to allow a winding-up petition to be used to decide a substantial dispute raised on genuine grounds, because presenting and advertising one puts pressure on a company to pay rather than to litigate. But the court is alert to a debtor 'raising a cloud of objections'. There, the injunction was refused: a sum plainly exceeding £750 was beyond dispute.
The costs risk is real. In Invenia Technical Computing Corporation v Hudson [2024] EWHC 1302 (Ch) the court said it is an abuse of process to present, or threaten to present, a winding-up petition where there is a bona fide dispute as to whether the debt is owed, and that a creditor against whom an injunction is granted 'runs a fairly high risk of being ordered to pay indemnity costs'. Indemnity costs were ordered in that case. On the indemnity basis, any doubt about whether costs were reasonable is resolved in favour of the party receiving them.
When the customer disputes the invoice explains the defences that turn a simple debt into a disputed one.
What a petition costs, and who benefits
At the time of writing (October 2026) the court fee for a winding-up petition is £352, and the petitioner must also pay a deposit of £2,600. For a creditor's bankruptcy petition the court fee is £352 and the deposit is £1,500. The deposit is security for the fee payable to the official receiver once a winding-up or bankruptcy order is made. If the petition is withdrawn or dismissed, it is repaid less £50.
Winding up is a collective process, not a private remedy. The liquidator's function is to secure that the company's assets are 'got in, realised and distributed to the company's creditors' (section 143). After preferential debts, ordinary debts rank equally, and if the assets are insufficient they are scaled down in equal proportions (rule 14.12). GOV.UK's guidance on winding up warns: 'You might not get all or any of the money you're owed.'
The route to a judgment, rather than to the debtor's insolvency, is a court claim.
What a solicitor will want from you
- The debtor's exact legal identity: company name, number and registered office, or an individual's full name and known addresses.
- The contract, the invoices and a statement of account, with interest and charges shown separately.
- All correspondence, especially anything in which the debtor queries, disputes or admits the debt, or claims a credit.
- Any judgment already obtained and what enforcement has been tried.
- What you know about the debtor's finances and other creditors.
This guide is general information about the law of England and Wales. It is not legal advice. The thresholds and fees are those in force at the time of writing (October 2026), and the 18-day and 21-day periods run from service of the demand.
Frequently asked
How much must be owed before a statutory demand can be used?
For a company, the Insolvency Act 1986 requires a debt exceeding £750. For an individual, including a sole trader, a creditor's bankruptcy petition needs a debt equal to or above the bankruptcy level, which is £5,000. Both figures are those in force at the time of writing (October 2026).
How long does the debtor have to respond to a statutory demand?
Three weeks (21 days) from service to pay the debt, or to secure or settle it to the creditor's satisfaction. An individual who wants the demand set aside must apply to the court within 18 days of service (longer if it was served abroad), or ask the court to extend time. A company has no set-aside procedure and applies instead for an injunction to stop a winding-up petition.
Is a statutory demand a court claim?
No: it is a written demand in a prescribed form that the creditor prepares and serves, and the Insolvency Practice Direction states that it is not a court document. It does not produce a judgment. Its effect is that an unmet demand allows the creditor to rely on the debtor's inability to pay in a winding-up or bankruptcy petition.
What happens if a statutory demand is used for a disputed debt?
The court may set aside a demand served on an individual where the debt is disputed on grounds that appear substantial, and may grant an injunction stopping a petition against a company. The High Court has said that a creditor restrained in this way runs a fairly high risk of being ordered to pay costs on the indemnity basis.