Statutory Demands: The 18-Day
Countdown to Crisis

A statutory demand is a formal legal document served under the Insolvency Act 1986, demanding payment of a debt of £750 or more. Unlike a normal invoice or debt collection letter, it's a legal weapon that can trigger compulsory liquidation of your company.

Key differences: It creates an 18-day legal deadline, can be used as evidence of insolvency, triggers immediate credit rating damage, and allows creditors to file winding up petitions after 21 days. Ignoring it can result in your company being forced into liquidation regardless of whether you're actually insolvent.

You have exactly 18 days from the date of service to respond to a statutory demand. This is not 18 working days - it's 18 calendar days including weekends and bank holidays.

After 18 days, the statutory demand is deemed to have expired. After 21 days from service, the creditor can file a winding up petition against your company. Time is absolutely critical - every day counts, and you should seek professional advice immediately upon receiving a statutory demand.

Yes, you can apply to court to set aside a statutory demand if you have valid grounds for dispute. However, the court has strict criteria and you must act within the 18-day deadline.

Valid grounds include: genuine dispute on substantial grounds, cross-claim that exceeds the debt amount, defective service, or incorrect format. The court fee is £154, but if unsuccessful, you may face additional legal costs. Professional legal advice is essential as the process is complex and time-critical.

Ignoring a statutory demand is one of the most dangerous mistakes a director can make. The consequences are swift and devastating:

• • Your company's credit rating is immediately damaged
• • After 21 days, creditors can file a winding up petition
• • Your company can be forced into compulsory liquidation
• • Directors may face personal liability for company debts
• • All business assets can be seized and sold
• • The business is permanently destroyed

Even if your company isn't actually insolvent, ignoring a statutory demand can still result in liquidation. Never ignore a statutory demand - seek professional help immediately.

Yes, directors can face personal liability in several situations related to statutory demands:

• • Personal guarantees given for company debts
• • Wrongful trading if continuing to trade after insolvency
• • Fraudulent trading allegations
• • Breach of director duties
• • Misfeasance claims by liquidators

Additionally, if a statutory demand leads to liquidation, directors may face disqualification proceedings, personal liability for unpaid taxes, and claims against personal assets. Professional advice is crucial to protect both the company and directors personally.

For companies, the minimum debt amount for a statutory demand is £750. For individuals (including directors personally), the minimum is £5,000.

These amounts are set by law and cannot be waived. However, creditors can combine multiple smaller debts to reach the minimum threshold. The debt must be undisputed and immediately payable. Interest and costs can be included if properly documented, potentially pushing smaller debts over the threshold.

Yes, you can attempt to negotiate, but this is risky and time-critical. Creditors are under no obligation to negotiate once they've served a statutory demand, and the 18-day deadline continues to run regardless of negotiations.

If you choose to negotiate, do so immediately and get any agreement in writing. However, don't rely solely on negotiations - prepare alternative strategies (payment or legal challenge) in case talks fail. Many businesses have been destroyed because they spent too much time negotiating and missed the 18-day deadline.

The costs vary depending on your chosen strategy:

• • Court application fee: £154
• • Legal representation: £2,000-£10,000+
• • If unsuccessful: opponent's legal costs (potentially £5,000-£20,000+)
• • Professional advice: £500-£2,000 for initial consultation and strategy

While these costs seem significant, they're minimal compared to the potential losses from liquidation (typically £50,000-£500,000+ in lost business value, assets, and personal liability). Early professional advice often identifies cost-effective solutions that avoid court proceedings entirely.