What is a statutory demand and how should directors respond?

A statutory demand is a formal written request for payment of a debt, typically used by creditors as a precursor to insolvency proceedings. In the UK, if a company owes more than £750 and fails to pay within 21 days of receiving a statutory demand, the creditor can use this as evidence to apply for a winding-up petition. Directors must take statutory demands extremely seriously, as ignoring them can quickly lead to compulsory liquidation. The best response is to either pay the debt, negotiate a repayment plan, or dispute the demand if the debt is not valid. Seeking professional advice immediately is essential to assess options and avoid escalation. Statutory demands are a clear warning sign that creditors have lost patience, and directors must act quickly to protect the business and themselves from further legal consequences.