Statutory Demand
A formal demand on a company to pay a debt within 21 days, used as a step toward winding up an insolvent company.
What it is
A statutory demand is a formal demand served on a company requiring it to pay a debt, usually within 21 days. It is a creditor's tool under corporations law and is generally used for undisputed debts above a set threshold. Failure to comply can be treated as evidence that the company is insolvent.
It is aimed at companies, not individuals, and is a significant escalation rather than a routine reminder.
Why it matters
If the company does not pay or apply to set the demand aside within the time limit, the creditor may apply to wind the company up. Because the consequences are serious, a statutory demand often prompts a quick response from a solvent business that simply has not paid.
It should only be used for genuine, clearly owed debts. Merion can advise whether this path fits a particular commercial debt through refer a debt.
Good to know
This is general information and not legal advice. A statutory demand is not suitable where the debt is genuinely disputed, because a company can apply to set it aside and the creditor may face costs. Strict thresholds, forms and time limits apply, so it is generally prepared carefully and used selectively as part of an overall recovery strategy.
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