Statutory demand: what to do
If a statutory demand has landed on your desk, treat it as urgent. It starts a strict 21-day clock, and ignoring it can lead the law to presume your company is insolvent, which is about as serious as a single document gets. The most useful thing you can do straight away is get advice, because the right response depends on the detail. This is a plain-English explanation of what the demand is and the options in front of you.
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What is a statutory demand?
A statutory demand is a formal written demand from a creditor for payment of a debt owed by a company, generally one above a set minimum amount and not genuinely in dispute. It is not an ordinary invoice or a chasing letter; it is a step with legal weight, and its real significance lies in what happens if you do nothing. Because of that, the worst possible response is to treat it like the rest of the paperwork on the pile. Even if you believe the debt is wrong, the demand needs a deliberate response within the time allowed, which is why advice early in the window is so valuable.
Why the 21-day window is so strict
From the date you are served, the company generally has 21 days to respond, and this deadline is unusually unforgiving. It is not the kind of timeframe that bends because you were busy or away, and an application to challenge the demand normally has to be made and served within that same period. Once the window closes it is very difficult to reopen, so the practical reality is that the clock, rather than the debt itself, is often the most pressing problem. Acting in the first days rather than the last gives whoever is advising you room to choose the right path instead of the only one still available.
What happens if you ignore it?
This is the part that makes a statutory demand matter so much. If the company neither pays the debt nor successfully sets the demand aside within the 21 days, the law can presume the company is insolvent. That presumption gives the creditor a clear path to apply to the court to wind the company up, and the company is then in the difficult position of having to prove its own solvency rather than the creditor having to prove the opposite. In other words, ignoring the demand does not make it go away; it hands the creditor a powerful next move. Understanding that consequence is usually enough to explain why speed matters here.
What are your options: pay, negotiate, or set aside?
Broadly there are three directions, and which one fits depends entirely on the facts. The first is to pay the debt, or reach agreement with the creditor to pay it, before the window closes, which removes the demand as a threat. The second is to negotiate, since many creditors would rather agree a workable arrangement than fund a court application, though any agreement needs to be real and documented rather than a vague assurance. The third, where the debt is genuinely disputed or the demand is defective, is to apply to the court to have it set aside within the 21 days. Each path has consequences and timing traps, which is exactly why this is a decision to make with advice rather than alone.
The first move is always advice
Because the right option turns on the size and validity of the debt, the company's actual financial position, and a deadline that does not forgive mistakes, the sensible first step is to get advice from an insolvency practitioner or a lawyer as soon as the demand arrives. They can tell you quickly whether there are grounds to set it aside, whether negotiation is realistic, and what the demand says about the company's wider position. If a statutory demand has appeared, it is also worth taking an honest look at how the company reached this point. The free Business Risk Self-Assessment is a quick way to do that before you speak to an adviser. This is general information, not legal advice.
Offermore reads your live Xero data and refreshes every day, so the cash-flow pressure that leads to a demand is visible well before a creditor reaches for one. If any of the terms above are unfamiliar, our plain-English glossary of insolvency terms explains statutory demands and the rest in plain language.
For the wider picture of what a statutory demand can lead to, our article on what happens when a business can't pay its debts walks through the formal options that follow.
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