Statutory demands and
winding-up petitions.

The statutory demand

A statutory demand is a prescribed-form written demand served on the company, usually at its registered office. It states the debt, how it arose and that the company has 21 days to pay it, secure it or agree a compromise. There is no court fee to serve one, and no court involvement at that stage.

Its effect is to put the company on notice that insolvency proceedings may follow. For a solvent business that has simply been slow, that notice is often enough.

The winding-up petition

If the demand is ignored, the creditor can present a petition to the court. The petition is advertised in The Gazette, which is where banks and other suppliers learn about it. Accounts are often frozen, credit is withdrawn and other creditors may join in. At the hearing the court can make a winding-up order, appointing a liquidator to realise the company’s assets and distribute them to creditors in the statutory order.

Presenting a petition involves a court fee and a deposit towards the official receiver’s costs, both of which change from time to time, so check the current figures on GOV.UK before budgeting. The petitioning creditor pays these up front and may or may not recover them.

When it is appropriate

These tools are for undisputed debts owed by companies that can pay but will not. The threat of liquidation is credible to a trading business with assets, customers and a bank. It is far less useful against a company that is already insolvent, because winding it up simply places you in the queue of unsecured creditors, usually behind secured lenders and the costs of the liquidation itself.

The risks

• Disputed debts. If the company disputes the debt on substantial grounds, the court can restrain the petition and order the creditor to pay the company’s costs. Petitions are not a way of winning an argument.
• Cross-claims. A company that says you owe it money may be able to resist the petition on that basis.
• Cost and time. Court fees, the deposit, legal costs and several weeks of process, with no guarantee of payment at the end.
• The relationship. A petition is public and final. Few customers come back from it.

Alternatives

For most unpaid invoices the ordinary route is more proportionate: a letter before action, negotiation through a recovery partner and, if needed, a county court claim followed by enforcement of the judgment. Statutory demands and petitions sit at the far end of that spectrum, and the decision to use them should be taken with advice.

If you make an enquiry with us, an independent partner can explain where your debt sits on that spectrum and what they would propose, before you commit to anything.