A statutory demand is a formal written demand for payment of a debt within 21 days. If the debtor does not pay within the 21 days and either fails to apply to have it set aside (where the debtor is an individual), or fails to apply to restrain the creditor from presenting a winding-up petition (where the debtor is a company), the creditor can use the statutory demand as grounds to present a petition to the court for a bankruptcy order or winding-up order.

A statutory demand can be used to support such petitions because non-payment of a statutory demand within 21 days may be deemed evidence of the debtor's inability to pay its debts (in the case of a company) or to pay the debt demanded (in the case of an individual). For company debtors the sum demanded must exceed £750 (section 123(1)(a), Insolvency Act 1986); for individual debtors it must be equal to or exceed £5,000 (in aggregate) (section 267(4), Insolvency Act 1986).

For more information, see Practice note, Statutory demands: an overview, Practice note, Responding to a statutory demand: a guide for companies and Practice note, Setting aside a statutory demand served on an individual.