When a business owes you an undisputed debt and simply will not pay, one of the most powerful levers available is the statutory demand, potentially followed by a winding-up petition. Used correctly it can prompt swift payment; used carelessly it can backfire. Here is how these tools work and how they interact with selling a debt.
What is a statutory demand?
A statutory demand is a formal written demand for payment of a debt. For a company, the debt must generally be £750 or more and undisputed. It gives the debtor 21 days to pay, reach agreement, or (for a company) risk being presumed unable to pay its debts — which opens the door to a winding-up petition.
Why it is so effective
- It signals you are serious and prepared to escalate to insolvency.
- The threat of being wound up is existential for a company, so solvent debtors usually pay fast.
- It is relatively quick and inexpensive compared with full litigation.
Many undisputed commercial debts are paid within the 21-day window simply because no solvent business wants a winding-up petition on the horizon.
The crucial warning: only for undisputed debts
A statutory demand and winding-up petition are not debt-collection tools for disputed debts. If the debtor has a genuine dispute or a cross-claim, using this route can be an abuse of process. The court can restrain the petition and order you to pay the debtor's costs. Only use it where the debt is clear and undisputed.
From demand to petition
- Serve the statutory demand.
- If unpaid after 21 days and undisputed, present a winding-up petition to the court.
- The petition is advertised and, if the debt remains unpaid, can lead to a winding-up order.
Note that a winding-up order benefits all creditors, not just you — the company's assets are shared out. It is a pressure tactic more than a personal recovery route.
How this interacts with selling the debt
A debt that is clearly undisputed and has survived a statutory demand is a strong asset — its validity is hard to challenge, which appeals to buyers. Conversely, if you would rather not take on the cost and risk of the insolvency route yourself, you can simply sell the debt to a buyer who has the appetite and expertise for it.
Conclusion
The statutory demand is a formidable tool against a solvent company that will not pay an undisputed debt — but it is dangerous if there is any real dispute. Use it precisely, or hand the whole matter to a buyer by selling the debt. Either way, an undisputed, well-documented debt is your strongest starting point.
