The fastest way to work out how to respond to a statutory demand is to check whether the debt is genuinely owed, then choose one of three routes within 21 days: pay it, dispute it in writing, or apply to court to have it set aside. Ignoring the demand is the one option that carries real risk, because after 21 days a creditor can use it as grounds for a winding-up petition.
This article works through each response route in order, the grounds a court will actually accept for setting a demand aside, and the timing that matters most before a petition can follow.
How to respond to a statutory demand: deciding whether the debt is genuinely owed
Before choosing a response, check the demand itself carefully. Look at the amount claimed, the date it was served, and whether the debt matches your own records.
- Do you recognise the creditor and the invoice or contract behind the debt?
- Is the amount correct, or does it include disputed charges, interest, or fees you don't accept?
- Was the demand served correctly, at the company's registered office?
- Has any part of the debt already been paid or offset against other work?
If the debt is genuinely owed and undisputed, the practical next step is usually to pay or agree terms. If there's a real dispute, or the demand itself has a defect, a different route applies.
Option 1: pay or agree terms
If the debt is correct and the company can afford it, paying in full within the 21-day window is the simplest way to stop matters progressing. This removes the creditor's grounds to petition for a winding-up order.
Where the company cannot pay the full amount immediately, contacting the creditor to agree a payment plan can also resolve things, provided the creditor is willing. There's no automatic right to a payment plan — it depends on the creditor agreeing in writing.
- Get any agreed payment plan confirmed in writing before relying on it.
- Keep evidence of payment (bank references, receipts) in case the creditor later disputes it.
- If cash flow is the underlying issue, this is also a good moment to speak to a regulated insolvency specialist about wider options.
Option 2: dispute the debt in writing
Where the company genuinely disputes the debt — because it's wrong, already paid, or subject to a counterclaim — the response is to write to the creditor setting out the grounds for dispute, with supporting evidence.
A clear written dispute matters because it becomes evidence later. If the creditor still presses ahead with a winding-up petition despite a genuine dispute, the court will generally not allow a petition to proceed on a debt that is disputed on substantial grounds.
- State clearly which part of the debt is disputed and why.
- Attach invoices, contracts, correspondence or other evidence.
- Send the dispute promptly — don't wait until close to the 21-day deadline.
- Keep a dated copy of everything sent.
Option 3: applying to set the demand aside
A company can apply to court to have a statutory demand set aside — effectively asking the court to cancel it. This is the formal route where the demand itself is flawed, not just where the underlying debt is disputed informally.
The application must be made within 18 days of service of the demand, using the court forms and process set out in the Insolvency Rules 2016. Missing this window doesn't stop you disputing the debt, but it does close off the formal set-aside route.
Grounds a court will accept for setting aside
Courts don't set demands aside lightly. The Insolvency Rules 2016 set out the grounds a court will consider, which broadly include:
- The debt is genuinely disputed on substantial grounds.
- The company has a valid counterclaim, set-off or cross-demand that equals or exceeds the debt.
- The demand was not served correctly, or there's a procedural defect.
- The creditor holds security for the debt and the demand doesn't account for it.
- There is some other reason the court considers the demand ought to be set aside.
A demand for a debt that's simply hard to pay, with no genuine dispute, is unlikely to meet these grounds. In that scenario, paying, agreeing terms, or taking early advice on the company's wider position tends to be more realistic than a set-aside application.
Getting the timing right before a petition follows
Two deadlines run from the date the statutory demand is served, and they don't align:
- 18 days to apply to court to set the demand aside.
- 21 days before the creditor can present a winding-up petition, if the debt (over the current threshold under the Insolvency Act 1986) remains unpaid, undisputed and unresolved.
Acting early — ideally in the first week — gives the most options. Waiting until the last few days narrows the choice to whichever route can still be completed in time, and increases the risk that the company misses the set-aside window altogether. Guidance on the demand and petition process is available from gov.uk. If a petition is later presented, our article on winding-up petition: what happens next sets out that stage in detail, and for background on the demand itself, see statutory demand: what it means for your company.
Frequently asked questions
Can a company set aside a statutory demand?
Yes. A company can apply to court within 18 days of service to have the demand set aside, on grounds such as a genuine dispute, a valid counterclaim, or a defect in how the demand was served.
What if the statutory demand is wrong or inaccurate?
Write to the creditor promptly setting out exactly what's wrong and why, with evidence. If the demand isn't withdrawn, an application to set it aside is the formal route to challenge it.
How long do I have to respond to a statutory demand?
You have 18 days to apply to set the demand aside, and 21 days before the creditor can present a winding-up petition if the debt remains unpaid and unresolved. Both periods run from the date of service.
Does responding to a statutory demand stop a winding-up petition?
Paying the debt, agreeing terms, or successfully disputing or setting aside the demand within the deadlines will normally prevent a petition being presented or allowed to proceed. Our guide on statutory demand to winding-up petition explained covers how the two stages connect.
What happens if I ignore a statutory demand?
If 21 days pass with no payment, agreement, dispute or set-aside application, the creditor may treat the company as unable to pay its debts and present a winding-up petition, which can ultimately lead to advertisement in The Gazette and compulsory liquidation.
This article is general information, not legal, financial or insolvency advice, and every company's circumstances are different.
If you'd like to talk through the options for your company, Harbourfirst can introduce you to a regulated insolvency practitioner or solicitor — start an enquiry.