Highlights of Statutory Demands
- A statutory demand is a formal legal document served by a creditor demanding payment of a debt and is the first step towards insolvency proceedings.
- The minimum debt requirement for a statutory demand is £750 for a company and £5,000 for an individual.
- The total cost to wind up a company following an unpaid statutory demand typically ranges from £5,000 to £8,000, including court fees (£2,600 for a winding-up petition), solicitor’s fees and disbursements.
- Creditors can recover reasonable costs if the statutory demand leads to a winding-up or bankruptcy order, but costs incurred before a petition is issued are usually not recoverable unless the contract provides for enforcement costs.
- Our lawyers have a 95% success rate in debt recovery matters, and can often act on a fixed fee or no win no fee basis.
- Debtors have 18 days to respond to a statutory demand by paying the debt, negotiating settlement, or applying to set it aside before further legal action can be taken.
Statutory Demand Costs: Full Breakdown (2025)
The cost of issuing and enforcing a statutory demand depends on whether you instruct a solicitor, the debtor’s response, and whether you proceed to a winding-up petition (company) or bankruptcy petition (individual). The table below sets out typical costs at each stage:
| Stage | Cost component | Typical range / fixed fee |
|---|---|---|
| Drafting the statutory demand | Solicitor’s fee (fixed) | £150–£500 + VAT |
| DIY (using Form 6.1 / 6.2) | £0 (template free from gov.uk) | |
| Service | Process server / courier | £50–£150 |
| Personal service (solicitor) | Included in drafting fee or £100–£200 + VAT | |
| Debtor applies to set aside | Debtor’s court fee (if they challenge) | £155 (company) / £280 (individual) |
| Your solicitor’s fee to oppose | £500–£1,500 + VAT (depends on complexity) | |
| Winding-up petition (company) | Court fee (High Court) | £2,600 (increased April 2024) |
| Solicitor’s fee (petition + hearing) | £2,000–£5,000 + VAT | |
| Advertisement in The Gazette | £80–£100 | |
| Bankruptcy petition (individual) | Court fee | £302 |
| Solicitor’s fee | £1,500–£3,000 + VAT | |
| Deposit to Official Receiver | £1,500 (payable on presentation) |
Total cost to wind up a company (if statutory demand unpaid): typically £5,000–£8,000 including court fees, solicitor’s fees and disbursements. Total cost for bankruptcy: typically £3,500–£5,000.
Cost recovery: If the statutory demand leads to a winding-up or bankruptcy order, the court will usually order the debtor to pay your reasonable costs (solicitor’s fees and court fees) as part of the liquidation or bankruptcy estate. However, if the debtor pays the debt before a petition is issued, you can recover the cost of the statutory demand itself only if your contract or the debt instrument (e.g. a loan agreement or guarantee) provides for recovery of enforcement costs — otherwise, you bear the drafting and service costs.
What is a Statutory Demand?
A statutory demand is the first legal step to recovering a debt, governed by the Insolvency Act 1986. It is a formal legal document served by a creditor on a debtor company or individual, demanding payment of a debt. The statutory demand serves as proof that the debtor is unable to pay the specified amount, and it warns of the possibility of further legal action, such as a winding-up petition for a company or a bankruptcy petition for an individual.
To serve a statutory demand, the debt must be:
- Where the debtor is a company, a minimum of £750 owed; and
- Where the debtor is an individual, the minimum amount is £5,000.
The legal standing of a statutory demand as the first legal step in debt recovery is crucial. It provides a legal basis for creditors to pursue debt recovery and initiates the time period within which the debtor must respond or face the consequences of non-payment. Understanding the definition and legal standing of a statutory demand, as well as the forms used for such demands, is essential for both creditors and debtors involved in the debt recovery process. In the case of a debtor company, a statutory demand can be the first step towards potential insolvency if the debt is not paid.
If you have a debt recovery dispute and wish to serve a statutory demand or have received a statutory demand, please call us for a free consultation on 0207 459 4037 today.
The Importance of Statutory Demands in Insolvency Cases
Statutory demands play a crucial role in insolvency cases and debt recovery. They serve as a formal demand for payment and act as a warning to debtors that further legal action may be taken if the debt is not paid.
Statutory demands, specifically for court judgment debts (CCJs), are often used as a last resort by creditors to recover outstanding debts. By leveraging a formal court judgment, the statutory demand debt becomes indisputable, eliminating any potential issues regarding its validity and the risk of a set aside application or injunction to restrain except if an application is made to set aside the judgment itself.
For creditors, issuing a statutory demand can be an effective and cost-efficient way to initiate the debt recovery process and put pressure on debtors to pay. The costs involved — typically £150–£500 plus VAT for drafting and £50–£150 for service — are relatively modest compared to the potential recovery, particularly where the debt is substantial and the debtor has the means to pay.
For debtors, responding to a statutory demand in a timely manner is essential to avoid the potential consequences of non-payment, including winding-up or bankruptcy proceedings and the associated costs (£5,000–£8,000 for a company winding-up; £3,500–£5,000 for bankruptcy). Understanding the importance of statutory demands in insolvency cases, particularly for recovering outstanding court judgment debts, is crucial for both parties involved in the debt recovery process.
Common Examples Where a Statutory Demand May be Used
There are several examples where a statutory demand can be properly used to request payment from a debtor, such as:
- Unpaid Invoices — for goods or services supplied to a business or individual where payment is overdue and the debt is undisputed.
- Personal Loans — where a lender has advanced funds to an individual and the borrower has failed to repay according to the loan agreement.
- Commercial Rent Arrears — where a tenant has fallen behind on rent payments and the landlord seeks to recover the outstanding amount.
- Guarantees — where a guarantor has agreed to stand behind a debt and the primary debtor has defaulted, making the guarantor liable.
- Judgment Debts — where a creditor has obtained a County Court Judgment (CCJ) or High Court judgment and the debtor has failed to pay the judgment sum.
In each of these cases, the creditor must ensure that the debt is not disputed and is due for payment of a liquidated sum. Incorrectly issued statutory demands can be challenged and set aside by the court, leading to potential legal and financial consequences for the creditor, including liability for the debtor’s costs.
It is also important for debtors to recognise the gravity of a statutory demand and respond appropriately, either by settling the debt, negotiating a settlement or, if the debt is disputed or other valid grounds exist, applying to set aside the statutory demand within 18 days of service.
The Process of Issuing a Statutory Demand
The process of issuing a statutory demand involves several steps to ensure its validity and enforceability. It begins with the preparation of the statutory demand document, which can be done using Form SD1, SD2, SD3 or SD4, and must follow the guidelines set out in the Insolvency Rules 2016.
The statutory demand should include the necessary information, such as the identification details of the debtor, the amount of the debt (including any interest calculated to the date of the demand), and the consequences of non-compliance.
Once the document is prepared, it must be served on the debtor personally (for individuals) or at the registered office (for companies). It is recommended to engage the services of a professional process server to ensure proper service and avoid any potential challenges to the validity of the demand. The cost of a process server is typically £50–£150.
Preparing the Statutory Demand
The statutory demand must follow the guidelines set out in the Insolvency Rules 2016 to ensure its validity and enforceability. It should include the necessary information, such as the identification details of the debtor, including their name and address. Additionally, it should state the amount of the debt and provide a clear statement of the debt claim.
The statutory demand should include any interest calculated to the date of the demand and specify the consideration for the debt (i.e. what the debt is for — unpaid invoices, loan, rent arrears, etc.). It must also warn the debtor of the consequences of non-payment, namely that a winding-up or bankruptcy petition may be presented if the debt is not paid or secured, or the demand set aside, within 21 days (for companies) or 18 days (for individuals).
Providing accurate and detailed information in the statutory demand document, including the correct format using the prescribed forms, is essential to ensure its effectiveness in the debt recovery process. Solicitors typically charge £150–£500 plus VAT to draft a statutory demand, depending on the complexity of the debt and whether bespoke drafting is required.
Legal Requirements for Service of Statutory Demand
Serving a statutory demand on the debtor is a critical requirement for its validity and enforceability. The method of service differs depending on whether the debtor is an individual or a company.
Serving an Individual
For individuals, the statutory demand must be served personally. This means that the document must be delivered directly to the individual debtor. The purpose of personal service is to ensure that the individual has received the demand, thereby eliminating any doubt about their awareness of the debt claim. Using a professional process server in this instance is highly advisable.
A process
