Statutory Demand Solicitors
A statutory demand is a formal insolvency trigger — not just a debt collection letter. You have 21 days to respond, and ignoring it gives the creditor the right to petition for your bankruptcy or the company's winding-up.
A statutory demand is a formal written demand under the Insolvency Act 1986 — for an individual, it is a prerequisite to a bankruptcy petition; for a company, it is evidence of inability to pay debts on which a winding-up petition can be based. You have 21 days from service to pay the debt in full, reach an arrangement with the creditor, or apply to the court to have the demand set aside. An application to set aside must be made within 18 days. Acting promptly — within hours of receiving a statutory demand — is critical. A solicitor will assess the grounds for set-aside and act immediately.
Responding to a Statutory Demand
Statutory demands — what they are, the grounds for set-aside, and what happens if you do not respond.
The response to a statutory demand must be determined within days — the 18-day window for a set-aside application closes quickly. A solicitor will assess the grounds and act within the required time frame.
What is a statutory demand and what triggers it?
A statutory demand is a formal written demand in a prescribed form — either Form 6.1 (individual) or a demand under section 123(1)(a) of the Insolvency Act 1986 (company). For individuals, it demands payment of a debt of £5,000 or more. For companies, it demands payment of a debt of £750 or more (the threshold applying during and following COVID moratoriums). If the demand is not complied with within 21 days — by payment, by a court-approved security, or by an arrangement — the creditor can present a bankruptcy or winding-up petition. The demand does not require a court order; any creditor can serve one. A solicitor will assess the demand on receipt and advise on the grounds and the deadline.
Ground for set-aside: the debt is disputed
The most powerful ground for setting aside a statutory demand is that the debt is genuinely disputed — meaning the debtor has a real prospect of successfully contesting the claim at a civil trial. The dispute does not need to be certain to succeed — it must have a realistic prospect of success. Where the debtor has a counterclaim, a set-off, or a genuine factual dispute about whether the debt is owed, the court will set aside the statutory demand. The application must be made within 18 days of service, and the evidence supporting the dispute must be before the court at the hearing. A solicitor will assess the strength of the dispute and draft the application and supporting evidence urgently.
Ground for set-aside: the creditor holds security
Where the creditor holds security for the debt — a charge over assets, a mortgage — the statutory demand can only be for the unsecured portion of the debt. A statutory demand that demands the full debt without giving credit for the value of the security is defective and can be set aside. A solicitor will assess whether the creditor is a secured creditor, whether the security has been valued, and whether the demand correctly reflects the unsecured balance — or whether the failure to account for security is a ground for a set-aside application.
Ground for set-aside: a counterclaim equals or exceeds the demand
Where the debtor has a genuine counterclaim against the creditor — for breach of contract, professional negligence, or any other claim — and the counterclaim equals or exceeds the demand amount, the court will set aside the statutory demand. The counterclaim must be genuine and legally sustainable — a mere assertion is not enough, but a properly evidenced claim will provide a complete defence to the statutory demand. A solicitor will assess whether the counterclaim provides a ground for set-aside and draft the application accordingly.
Negotiating a payment arrangement to avoid insolvency proceedings
Where the debt is genuine but the debtor has short-term cashflow difficulty, negotiating a payment arrangement with the creditor — structured to be completed or substantially performed within the 21-day period — may allow the demand to be withdrawn without a set-aside application. A solicitor will engage the creditor promptly, propose a realistic repayment plan, and document the arrangement in terms that the creditor will accept as satisfying the demand — including a binding consent that the creditor will not present a petition while the arrangement is maintained.
What happens if you do nothing
Ignoring a statutory demand — allowing the 21-day period to expire without paying, reaching an arrangement, or applying to set it aside — creates a significant legal risk. For individuals, the creditor can immediately present a bankruptcy petition. For companies, the failure to comply within 3 weeks is deemed evidence that the company cannot pay its debts — enabling a winding-up petition. The consequences of a bankruptcy or winding-up petition are far more serious and more expensive to address than a timely set-aside application. A solicitor will ensure no deadline is missed and that the most effective response is in place before the 21 days expire.