When & How to Make a Statutory Demand?
Upon receiving a statutory demand, the debtor (e.g. an individual or a company) has twenty one (21) days to (either):
- Settle the debt in full.
- Reach an agreement with the creditor about the payments.
You can make an application to bankrupt the debtor (or ‘wind up’ the company) if they fail to respond within twenty one days.
Note: There may be other options available if you are owed money to get a small debt paid more quickly than making a statutory demand. But, you may need to get legal advice about recovering a debt that is more than six (6) years old.
Forms for Serving Statutory Demands
After choosing the appropriate form, you will need to fill it in and then ‘serve’ it (deliver) to the person or to the organisation that owes you money. There is no legal requirement to send a separate letter to them.
Individuals (including business partnerships)
You need to send a separate form for each partner if the debtor is someone in a business partnership. But, when serving a demand on an individual, the form you need will depend on the way that the debt is being collected. Thus, you should use:
- Form SD2 to demand the immediate payment of a debt within twenty one (21) days.
- Form SD3: Statutory demand under Section 268(1)(a) of the Insolvency Act 1986 for a debt payable at a future date (e.g. you think they may be unable to pay it when needed).
- Form SD4: Statutory demand under section 268(1)(a) of the Insolvency Act 1986. Debt for liquidated sum payable immediately following a judgment or order of the court.
Important: You need to use a different creditors form (e.g. Form 1 – Statutory Demand) to make and serve a statutory demand in Scotland.
Serving a Demand on a Limited Company
Creditors must use Form SD1 (a ‘statutory demand’) to demand the immediate payment of a debt from a limited company (e.g. within twenty one days).
How to Serve a Statutory Demand
There are several ways of serving statutory demand forms listed above and found on the GOV.UK website, such as:
- Delivering it in person to the individual that owes money to you (try all known addresses).
- Giving it ‘directly’ to the director of the company, their secretary, the business manager, or to the company’s principal officer.
- Leaving it at the main place of business (usually the registered office) of the partnership or the company that owes you the debt.
- Using a solicitor to get a ‘process server’ (e.g. to serve the statutory demand on your behalf).
What if a Debtor Ignores a Statutory Demand?
You will need to provide some information from your records if the demand is ignored. If the debtor fails to pay the debt within the twenty one day deadline, or they won’t agree to the statutory demand, you can (either):
- Apply to bankrupt an individual who owes you money (e.g. at least £5,000).
- Wind up a company that owes you money (e.g. minimum £750).
The time limit for applying to bankrupt individuals, or winding up companies, is four (4) months. You would need to provide a reasonable explanation to the court named on the statutory demand if yours is late.
Records that You Need to Keep
Besides keeping a copy of the statutory demand that you served, you will also need to keep copies of anything that confirms:
- The debtor received a written warning from a creditor.
- The time and date when the statutory demand got served (e.g. confirmation from a process server, postage receipts).
Serving a Statutory Demand from Abroad
You can serve a statutory demand from another country (e.g. overseas of the United Kingdom). Even so, it would need to follow the local laws abroad as well as the UK rules and regulations as set out in law.
Note: You can send a statutory demand by registered post or you can put it through a letterbox if you cannot deliver it in person.
How to Challenge a Statutory Demand
What if someone sends you a statutory demand and you do not agree with it? If so, you can apply to challenge it and have it canceled (set aside). But, ignoring it can result in you being made bankrupt (or your company being wound up).
You can make a challenge by applying to the court that has been named on the statutory demand (usually one of the nearby county courts).
As a rule, the court will then suspend any bankruptcy petitions that a creditor filed against you – until they make a final decision. Nonetheless, they do not usually set aside statutory demands served after another court passes a judgment, such as when:
- The amount stated on the statutory demand is ‘secured’.
- You believe the creditor owes you at least the same amount as your debt.
Note: It is not possible to challenge a statutory demand served on a company. Instead, follow the guidelines for responding to a statutory demand (e.g. to stop a creditor winding up the company).
Deadlines for Challenging Statutory Demands
Use Form IAA to apply to challenge a statutory demand. You should make the application no later than (either):
- Eighteen (18) days – if you were in the United Kingdom when you received it.
- Twenty one (21) to thirty four (34) days – if you were in another country. The period for responding to an application notice varies according to the table of countries.
You can use the next available day if the deadline falls on a weekend or one of the UK bank holidays. The court may also grant you an extension for certain circumstances.
In most cases, the court will contact you within ten (10) working days of making the application. But, they can also give the creditor permission to issue a bankruptcy petition against the debtor (e.g. if they don’t agree with the application notice).
The court will pass the case over to a bankruptcy registrar if they agree with the application. Following that, they will review the case and arrange for a hearing.
Procedures at the Hearing
Both parties will have an opportunity to present their case to either a registrar or a court judge. Then, they will make a decision (or request further evidence). As a rule, you get their decision once the final hearing has taken place.
The court will ‘set aside’ the statutory demand if you win the case, and they will suspend the deadline for paying the debt.
But, if you lose, you will have twenty one (21) days to pay back the money that you owe. Failing to pay means the creditor can apply to make you bankrupt (if the debt is at least £5,000).
Contacting the Insolvency Service
The Insolvency Enquiry Line can give further information about how to deliver and challenge a statutory demand in the United Kingdom.
Important: You should not attend the court if you have symptoms of coronavirus (COVID-19), self-isolating, or you are in quarantine. Instead, notify the court that you will be unable to make the attendance.
Related Help Guides
- Applying to become bankrupt if you cannot pay off your debts.
- How to get a county court judgment (CCJ) for debt?
- Taking legal action when someone owes you money (small claims court).
Note: The main section contains information about making court claims, debt recoveries, and registering for insolvency or bankruptcy.