What a statutory demand is and when to send one
By InvoiceReminder Editorial Team · Published 6th August 2026
When a client simply stops responding to your invoices and reminders, it can feel like you’ve hit a dead end. You’ve sent the emails, made the calls, and issued a final notice, but the payment is still outstanding. For significant, undisputed debts owed by a limited company, there is one final, formal step you can take before initiating legal proceedings: the statutory demand. This is a powerful but often misunderstood tool in the UK credit control toolkit.
This article breaks down exactly what a statutory demand is, the specific circumstances in which you should consider using one, and the serious consequences for a company that chooses to ignore it. We will cover the process, the risks, and the potential outcomes, giving you the clarity needed to decide if this is the right next step for recovering your money.
What is a Statutory Demand?
A statutory demand is a formal, written demand for payment of a debt. It is not a court document and does not require a solicitor to prepare, but it carries significant legal weight. Its primary purpose is to prove that a company is unable to pay its debts as they fall due, which is a key test for insolvency under UK law.
Think of it as the ultimate final notice. By serving a statutory demand, you are formally stating to the debtor company: "Pay this undisputed debt within 21 days, or we will be entitled to petition the court to have your company wound up (i.e., forced into compulsory liquidation)."
The key features of a statutory demand are:
- It's for undisputed debts: This is the most important rule. If the client has a genuine, credible dispute about the quality of your work, the amount on the invoice, or your contract terms, a statutory demand is the wrong tool. Using it for a disputed debt is considered an abuse of process and can be "set aside" by a court, potentially leaving you liable for the debtor's legal costs.
- There's a minimum debt threshold: For a statutory demand to be served on a limited company, the debt must be at least £750. For individuals or sole traders, the threshold is higher at £5,000.
- It has a strict timeline: The debtor has 21 days from the date of service to either pay the debt, secure it (e.g., offer a charge over a property), or apply to the court to have the demand set aside.
- It creates a presumption of insolvency: If the 21-day period passes with no payment and no action from the debtor, the law presumes the company is insolvent. This gives you, the creditor, the legal standing to file a winding-up petition with the court.
When Should You Consider Using a Statutory Demand?
A statutory demand is a nuclear option in credit control. It should only be used as a last resort when all other attempts to recover the debt have failed. Before even thinking about this step, you must have a robust credit control process in place.
Your standard chasing process should look something like this:
- Invoice sent with clear payment terms.
- Polite email reminder shortly after the due date.
- A firmer follow-up email a week later.
- A phone call to the accounts payable department or your main contact.
- A formal letter or email titled "Final Notice" or "Letter Before Action", stating your intention to take further steps.
Only when this entire process has been exhausted and you have received no payment and no credible dispute should you consider a statutory demand.
Before proceeding, check that your situation meets these criteria:
- The Debt is Undisputed: The client has received the invoices and has not raised any substantive complaints. A vague "I'm not happy" is not a dispute; a detailed email explaining specific faults with your work might be.
- The Debtor is a Limited Company: You have checked their status on Companies House.
- The Debt Exceeds £750: This can be a single invoice or a collection of invoices totalling more than £750.
- You Have Their Correct Details: You have the company's full legal name and registered office address from the Companies House register. This is essential for correct service.
A well-managed credit control process can often prevent debts from escalating this far. Manually tracking and sending reminders is time-consuming and prone to error. Using a system like InvoiceReminder to connect to your accounting software (like Xero or QuickBooks) and automate this sequence of friendly and firm reminders ensures no overdue invoice is forgotten, increasing your chances of getting paid before you need to consider more serious measures.
The Risks and Downsides: Why It's a "Last Resort"
While powerful, a statutory demand is not a magic bullet and comes with significant risks. You must weigh these carefully before proceeding.
The Debt is Disputed
If the debtor can show the court they have a genuine dispute or a counterclaim against you, they can apply to have the demand set aside. If the court agrees, not only has your attempt failed, but you will almost certainly be ordered to pay the debtor's legal costs for having to defend against an inappropriate demand. This can turn a bad debt into a much larger financial loss.
It Destroys the Relationship
Serving a statutory demand is an aggressive act. There is virtually no chance of maintaining a positive commercial relationship with a client after you have threatened them with liquidation. If you ever hope to work with this client again, this is not the path to take.
It Doesn't Guarantee Payment
If the company is genuinely without funds, forcing it into liquidation doesn't magically create money to pay you. You will simply become one of many unsecured creditors in a formal insolvency process. While the liquidator's job is to realise the company's assets to pay creditors, you may end up receiving pennies in the pound, or nothing at all, after a very long wait. The threat is often more powerful than the outcome.
How to Create and Serve a Statutory Demand
If you have weighed the risks and are confident it is the right step, the process itself is procedural. Precision is vital.
1. Find the Correct Forms
The official forms are available on the gov.uk website. You must use the correct one. For serving a debt on a limited company, you will need Form SD1. Do not use the forms intended for personal debts.
2. Fill Out the Form Correctly
Every detail on the form must be 100% accurate. Any errors could be used as grounds to have the demand set aside.
- Debtor Details: Use the exact company name and registered office address as listed on Companies House. Do not use their trading name or trading address unless it is also their registered office.
- Creditor Details: Enter your own business's full legal name and address.
- The Debt Amount: State the exact amount owed. This should include the principal sum of your invoices plus any statutory interest and compensation you are legally entitled to claim under the Late Payment of Commercial Debts (Interest) Act 1998. Be prepared to show a full calculation of how you arrived at this figure.
- Details of the Debt: Clearly state what the debt is for, listing the invoice numbers and dates. For example: "For the supply of professional services as detailed in invoice no. 1023 dated 15 January 2024 (£1,200) and invoice no. 1045 dated 20 February 2024 (£800)."
3. Serve the Demand
"Serving" the demand means officially delivering it to the company. You must be able to prove they received it. The two main methods are:
- Personal Service: This is the most robust method. You hire a professional process server who will personally attend the company's registered office and hand the document to a director, company secretary, or other senior person. They will then provide you with a sworn statement (an affidavit or certificate of service) as proof, which is invaluable if you later need to file a winding-up petition.
- Registered Post: You can post the demand to the company's registered office. While legally acceptable, it is weaker than personal service as it can be harder to prove that the relevant person in the company actually saw it. If you use this method, always use a tracked and signed-for service.
What Happens After a Statutory Demand is Served?
Once served, the 21-day clock starts ticking. The debtor company has three main options, leading to several possible outcomes for you as the creditor.
| Outcome | What it Means for the Debtor | What it Means for You (the Creditor) |
|---|---|---|
| Payment in Full | The company pays the full amount demanded, including any interest and compensation. The matter is closed. | Best Case Scenario. You receive your money. The process has worked as a threat to prompt payment. |
| Negotiation | The company contacts you to agree a payment plan or a settlement figure. They acknowledge the debt is due. | Good Outcome. You may not get 100% of the money immediately, but you have a clear agreement to recover the debt without further legal action. |
| The Debt is Disputed | The company instructs solicitors and applies to the court for an injunction to have the demand set aside. | High Risk. The process is paused. You now face a potential legal battle and the risk of having to pay the debtor's costs if they succeed. |
| It's Ignored | The company does nothing. After 21 days, they have not paid, disputed, or secured the debt. | Decision Point. The company is now legally presumed to be insolvent. You have the right to petition the court to have the company wound up. |
If the Demand is Ignored: The Winding-Up Petition
This is the final step. Filing a winding-up petition is a formal court process that is expensive and complex. You will need a solicitor. The court fees and legal costs can run into thousands of pounds, which you have to pay upfront (though you can claim them back as part of the debt if the petition is successful).
Once filed, the petition is advertised in The London Gazette. This is a public record that banks monitor closely. As soon as a bank sees a winding-up petition advertised against one of its customers, it will freeze the company's bank accounts to protect its own position. This is often the event that forces a reluctant debtor to finally pay, as they can no longer operate their business.
Calculating Interest and Compensation on Your Overdue Invoice
When you issue a statutory demand, you are entitled to add statutory late payment charges to the original invoice amount. For business-to-business transactions, this is governed by the Late Payment of Commercial Debts (Interest) Act 1998.
You can claim:
- Statutory Interest: This is calculated at 8% plus the Bank of England base rate. The base rate changes, so you must check the correct rate that was in force for the period your debt has been overdue.
- Fixed Compensation: This is a one-off charge per overdue invoice to cover the cost of recovery.
| Invoice/Debt Amount | Fixed Compensation You Can Claim |
|---|---|
| Up to £999.99 | £40 |
| £1,000 to £9,999.99 | £70 |
| £10,000 or more | £100 |
Including these legitimate charges in your statutory demand increases the pressure on the debtor and compensates you for the time and effort spent chasing them. Make sure your calculation is clearly itemised.
Frequently Asked Questions
Can I send a statutory demand for a disputed debt?
No. This is a critical point. A statutory demand should only be used for debts that are clearly due and not subject to a genuine dispute. If the debtor has a credible reason for not paying, they can ask a court to set the demand aside, and you may be ordered to pay their legal costs.
What is the minimum debt for a statutory demand in the UK?
For a debt owed by a limited company, the minimum amount is £750. If the debt is owed by an individual, sole trader, or partnership, the threshold is much higher at £5,000, and ignoring it can lead to a bankruptcy petition instead of a winding-up petition.
Do I need a solicitor to send a statutory demand?
You do not legally need a solicitor to prepare and serve a statutory demand itself. You can use the official forms and a process server. However, given the serious risks of getting it wrong (especially if the debt might be disputed), seeking legal advice is highly recommended. You will definitely need a solicitor if you decide to proceed to a winding-up petition.
How long does a company have to respond to a statutory demand?
A company has 21 days from the date the demand is successfully served to pay the debt, reach an agreement with you, or apply to the court to have it set aside.
Is a statutory demand the same as a County Court Judgment (CCJ)?
No, they are very different. A CCJ is an order from the court after you have already gone through the court claims process and won your case. A statutory demand is a pre-legal step that doesn't involve the court initially but uses the threat of a future winding-up petition (which is a different court process) to force payment.
What happens if I make a mistake on the form?
Mistakes can be fatal to your demand. A simple typo might be overlooked, but significant errors—such as using the wrong legal name for the company, an incorrect registered address, or miscalculating the debt—are strong grounds for the debtor to apply to have the demand set aside. Always double-check every detail against official sources like Companies House.
Stop Chasing, Start Automating
While a statutory demand is a powerful tool for serious non-payment, the ideal scenario is to have such effective credit control that you never need to use it. Consistently and professionally chasing payments from the moment they become due is the single best way to maintain healthy cash flow and avoid escalating disputes.
This is where automated credit control comes in. Instead of spending hours manually tracking due dates and drafting reminder emails, InvoiceReminder can do the heavy lifting. It connects to your Xero, FreeAgent, Sage, or QuickBooks account and automatically sends a scheduled sequence of polite, firm, and final reminders for you. It's built for UK freelancers, small businesses, and accountants who want to get paid faster without the administrative headache. The core email reminder functionality is currently available at no cost on the Free plan, helping you establish a robust chasing process long before a debt becomes a problem.