Statutory demands for restructuring and insolvency professionals

What is a statutory demand?

A statutory demand is a formal demand for a debt served by a creditor on its debtor. Failure by the debtor to pay the debt, or satisfy or secure it to the creditor's satisfaction—or take the appropriate steps to challenge it—will create a presumption that the debtor is insolvent (on an inability to pay basis) and therefore exposes the debtor to the risk that insolvency proceedings will be commenced by the creditor.

Statutory demands can be served on both corporate and individual debtors:

•
in the case of a corporate debtor, service of a statutory demand is not a prerequisite to a creditor presenting a winding-up petition (section 122 of the Insolvency Act 1986 (IA 1986))
•
in the case of an individual debtor, a creditors’ bankruptcy petition can only be founded on the ground of either an unsatisfied statutory demand, or an unsatisfied execution of a judgment debt (IA 1986, ss 267–268)

A statutory demand is not issued at court before being served on the debtor. Because of this, it

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