Statutory Demands - Advice for Debtors

Being served with a statutory demand is often the first sign that a business debt issue has moved beyond informal collection and into the insolvency process. It is a serious legal step that places strict time limits on you and, if handled incorrectly, can lead directly to bankruptcy or winding up proceedings.

The statutory demand solicitors at Clough & Willis act for individuals, businesses and company directors who have been served with a statutory demand and need clear, decisive advice. We assess your position, explain the options available to you and make sure you can take control of the situation before matters escalate unnecessarily. In many cases, early involvement of our commercial law team makes a material difference to the outcome.

If you have received a statutory demand, contact Clough & Willis on 0800 083 0815 or complete our online enquiry form to speak with a solicitor as soon as possible.

How Can Clough & Willis Help?

Statutory demands are governed by strict insolvency rules and short time limits. Whether the debt is disputed or not, the way a statutory demand is handled at an early stage will determine what happens next.

Clough & Willis advises clients on every aspect of responding to a statutory demand. Our statutory demand solicitors review whether the demand has been properly issued, assess whether there are grounds to challenge it and explain the most appropriate course of action based on your particular circumstances.

We regularly assist with applications to set aside statutory demands, injunctions to prevent winding up proceedings and representation in court where required. We also advise where payment, negotiation or alternative solutions may be more appropriate, so you can avoid unnecessary legal action and escalating associated costs.

Why a Statutory Demand Carries Serious Legal Consequences

A statutory demand allows a creditor to move directly into insolvency action without first obtaining a court judgment. Once a statutory demand is served, the law assumes the debt is undisputed unless the debtor takes formal steps to challenge it within a strict timeframe.

If no action is taken within the set period - generally three weeks from service - the creditor may rely on the statutory demand to issue a bankruptcy petition against an individual or begin winding up proceedings against a company. At that stage, the court will not reconsider the underlying debt in the same way, and the focus shifts to insolvency rather than dispute resolution.

A statutory demand minimum amount must be met before a notice can be issued, and strict insolvency rules govern how demands are prepared and served. Where a demand does not comply with those rules, or where the debt is genuinely disputed, it may be open to challenge. However, these arguments must be raised properly and in time. Identifying defects, assessing whether a dispute is legally sufficient and deciding whether court action is required involves legal judgement, which is why statutory demand matters should be handled with solicitor involvement rather than informally. Therefore, those who find themselves in this position should contact the commercial law solicitors at Clough and Willis as soon as possible.

What Happens if a Statutory Demand Is Ignored?

If a statutory demand is served and the debtor fails to respond within the required time limits, the creditor may take further legal action. For individuals, this can result in bankruptcy proceedings and the risk of being declared bankrupt. For businesses and corporate entities, it can lead to winding up proceedings.

Once court proceedings begin, options narrow and legal costs increase. Other creditors may become involved, and company directors may face pressure and scrutiny. Ignoring a statutory demand usually places the debtor in a weaker position than engaging with the process early and properly.

Where possible, you should contact the statutory demand solicitors at Clough and Willis before you reach this point. We will assess the risks and advise on how best to protect your position before matters escalate further.

What to Do as Soon as a Statutory Demand Is Served

Time limits begin as soon as a statutory demand is served. Demands may be served personally by a process server, or, in certain circumstances, delivered by registered post. The demand must be brought to the debtor’s attention, and failures in service can sometimes allow you to challenge a demand.

It is also necessary to check that the correct statutory demand forms have been used and that the debt claimed is accurate.

At this point, seeking legal advice is particularly important. Clough & Willis will review the demand, confirm whether it complies with the insolvency rules and advise on whether to challenge it, apply to court or take another course of action that avoids unnecessary risk.

Challenging a Statutory Demand Through the Court

In many cases, it is possible for your solicitor to apply to set aside the statutory demand. This requires a formal court application supported by evidence, usually in a witness statement.

Common grounds for challenge include a genuine dispute over the debt, meaning there is a real legal disagreement about whether the money is owed or the amount claimed. A statutory demand may also be challenged where there is a cross demand, which arises if the debtor has a claim against the creditor that equals or exceeds the sum demanded. In other cases, a valid set off may apply, where there is a case for the debt being reduced or extinguished due to payments made or losses caused by the creditor.

These issues must be properly identified and supported with evidence. Applications are typically made by a solicitor to the county court or the relevant hearing centre. If the court is satisfied that there are genuine grounds, a court hearing will be scheduled to consider the matter further. If the statutory demand is set aside, it cannot be relied upon to support bankruptcy or winding up proceedings.

The court process is technical and procedural. Missing deadlines or failing to present evidence correctly can result in an application being dismissed. Your solicitor’s role is to identify whether there are genuine grounds, prepare the application properly, and represent you effectively in court.

Advice for Individuals Facing a Statutory Demand

For individuals, a statutory demand can quickly lead to bankruptcy proceedings if not dealt with correctly. Where the debt is genuinely disputed, applying to set aside the statutory demand may be appropriate. Where the debt is not disputed, payment or other options may need to be considered before the set period expires.

If the debtor pays within the required timeframe, no further action should follow. If the debtor fails to pay and takes no legal action, the creditor may issue a bankruptcy petition. If you are concerned about these circumstances, get in touch with our team as soon as possible. We will look at your situation, the process that has been followed and seek to protect your interests.

Advice for Businesses and Company Directors

Businesses do not have the same automatic right as individuals to apply to set aside a statutory demand. Where a debt is genuinely disputed, it may be necessary to seek an injunction to prevent winding up proceedings.

Company directors should treat statutory demands as a priority. Delay can increase legal fees and expose the business to winding up petitions. A solicitor can advise on whether the demand is valid and what steps to take to protect the company and its directors.

If the debt cannot be disputed, then the company should pay or consider insolvency options, such as company voluntary arrangements, administration or other rescue options.