All You Need to Know about Statutory Demand

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Date published: 26 Feb 2021
by DocPro Legal
Last Update: 1 Mar 2021

Economic downturns may place undue pressure and burdens upon many businesses. Even businesses with a sound revenue model may face cash flow and liquidity problems. Despite this, companies may have to keep paying their operating costs, such as salaries, rent. Otherwise, they are at risk of not receiving any income at all. Companies may eventually burn out all their working capital and become at risk of bankruptcy.


When a company is unable to fulfil its monetary obligations, a creditor may choose to serve a statutory demand with the intention of winding-up a company.


A statutory demand is a legal document in which the creditor issues to the debtor, demanding payment. Upon the expiry date (Usually 18- or 21 days from the date of the delivery) on the statutory demand, a creditor may be entitled to file for winding-up or bankruptcy orders. This is one way to ‘threaten’ another company or individual to make payment immediately and clear out the outstanding sums.


What are the essential elements of a statutory demand?


The sum of money owed:

The figures should be clearly stated in the document itself. Technically, most jurisdictions do not provide a minimum amount that is needed for statutory demands. As the consequences of not compiling with a statutory demand could potentially entitle the creditor to apply for a petition to wind-up the company, the sum of money owed is usually very significant. Moreover, winding-up a company is a serious legal procedure with arguably irreversible consequences. Many jurisdictions provide a minimum amount that a person or a company must owe before the creditor can actually initiate a winding-up order.





The following are the minimum amount required to initiate a winding-up order for some of the common law jurisdictions: (Figures as of 2021)







Hong Kong










United Kingdom






Besides the sum owed to you by the debtor. A creditor has to consider the costs of filing winding-up. Here is a table of the costs of petitioning for a winding-up or bankruptcy order: (As of 2021)







Hong Kong

$9,045 ($8,000 Official Receiver fees +$1,045 High Court fees)

$11,250 Deposit fees


Dependent on the assets, please visit


For more information



$1,850 Deposit fee


$10,400 Deposit fee

United Kingdom

£1270 Court fee (£280 Court Fees+ £990 petition deposit fees)

£1,880 (£280 Court Fees + £1,600 Deposit that is payable if the debtor pays up or is clearly insolvent)





Otherwise, creditors might be better off pursuing other remedies, such as filing a claim under the small claim’s tribunal or enforcing a court judgment.


Description of the sum of money owed:

It is not sufficient to estimate the total amount of debt payable to the creditor. The creditor must provide details of each component and the payable amount for each section.


The name of the debtor

Normally, this should be very intuitive as it is the person or company that owes you money. This is slightly more complicated when one’s business structure may involve multiple different legal identities. Moreover, what happens frequently is that a debtor would have already structured their business in such a way to escape as much liabilities as possible, such as by setting up multiple ‘empty shell companies’. By setting up multiple companies, they borrow money under different company’s names, and each of them may have a different liability registered with them.


The address of the debtor:

For companies, it should be the address that the company is registered with under company registries. The address should be the debtor’s residential address or the address of their workplace for the individuals. You serve the statutory demand in person, along with a third-party who may provide an affidavit (a testimony) as evidence to prove that a statutory demand has been duly served. However, it is understandable that when a person in debt, they are mostly going to be out of sight. This makes it necessary for the creditor to advertise demand through one or more newspapers publicly. There may be a minimum advertising period required for serving a statutory demand in such ways. You should definitely consult your lawyer on what are the local requirements for serving a valid statutory demand.



Is a statutory demand compulsory (for winding-up a company)?


The main purpose of serving a statutory demand is to initiate a winding-up order. The requirement for statutory demand is different for each jurisdiction. As mentioned, a statutory demand is a specific legal document provided by legislation. It has a specified form and requirements. You should check with your own jurisdiction whether this is compulsory.


For some common law jurisdictions, like Hong Kong, a statutory demand is not strictly necessary. As mentioned, the legal consequence of not compiling with a statutory demand entitles a debtor to petition for a winding-up order. For this reason, a statutory demand is merely a tool provided by the legislation to prove one’s insolvency. It provides the basis and justification for winding-up a company. There are, however, other ways of providing such legal basis:

  1. Failure in enforcing a court judgment (e.g., a monetary judgement)

  2. Failure to deal with your debts under an Individual voluntary arrangement (‘IVA’)’

  3. Other instances that prove insolvency of a debtor



When should you send a statutory demand?


You have noticed that a company has not paid a significant sum of money owed to you for a long time. You want your money back. Not only because you are entitled to that sum of money, but your company might also be facing liquidity issues soon.


Is it then always a good idea to send a statutory demand when a person or company owes you money? Arguably, no.


Here are some of the factors that you need to think about before serving a statutory demand to a debtor:


a) Have you exhausted all other options of getting your money back?

Sometimes, it is unnecessary to send a statutory demand to force the debtor to make a payment. You may want to consider simply negotiating with the debtor first before sending a statutory demand that put the debtor in a distressed position.


b) Do you want to permanently end your partnership or collaboration with this person or company? Winding up a company is arguably an irreversible process. If you serve a statutory demand to pressure the company to pay merely, you run the risk of getting less money than intended if the company continues to default after the 18- or 21- days period. If the company has great prospects of repaying in the long term, you should consider negotiating a payment term before serving a statutory demand.


c) Think about the negotiation terms within the 18- or 21- days period:

You should be prepared to negotiate and make some demands after you have served a statutory demand. As mentioned, shutting down a company via a winding-order is the least desirable consequence out of all of them for many creditors. From the standpoint of a creditor, you may want to consider


d) What are the consequences of winding-up a company or petitioning for a bankruptcy order against an individual

In the process of winding-up orders and bankruptcy order, there may be other creditors who are entitled to claim the debts owed to them and may not necessarily have the priority against these other creditors. It would be best to discuss the strategy you may want to go forward with your lawyer that best serves your company's interest.


How to deal with a statutory demand?


You have been served with a statutory demand. Do not panic. Here are some tips on what you need to do next:



  1. Highlight or note down the date of service:

    This is the date that the document has been delivered to you. The 18- or 21- days requirement to comply with the statutory demand starts on this date. You must keep track of this date as you need to plan out what you will do within this time frame. If you fail to comply with the statutory demand after the 18- or 21- period, the creditor may then apply for a bankruptcy or winding-up order against you or your company.


  1. Read the statutory demand carefully. Note down each component of the sum payable to the creditor:

    Sometimes, there are mistakes on the form. The amount claimed might be mistaken. However, usually, minor mistakes on the amount claimed will not necessarily make the statutory invalid. Court generally are reluctant to set aside a statutory demand on a minor mistake on the figure.


  1. Decide on whether you agree with the content of the statutory demand or not:

    Many companies file for statutory demands as a mere threat. As mentioned, a statutory demand comes with serious consequences. The person who files for a statutory demand knows that it will inflict a major psychological effect upon the receiver and use it for their benefit. Make sure you check that the sums claimed in the statutory demand are valid and accurate.


  1. Seek legal advice immediately:

    After doing your own investigations, you should seek help from a lawyer to take appropriate steps to deal with a statutory demand. If you disagree with the statutory demand that has been served to you, you may discuss with your lawyer on applying to the court to set aside the statutory demand if the creditor subsequently decides to wind up your company.


  1. Negotiate with the creditor:

    Most of the time, it is usually not in the creditor's best interest to wind-up a company. You should definitely utilise the 18- or 21- day window to negotiate and aim to settle with the creditor.


  1. Restructuring:

    If you cannot settle with your creditor, you may want to consider restructuring your company and refinancing your debts. You may want to get a (personal) guarantor, take out loans from a bank, sell your assets, finance your company by selling equities at your company or arrange for a merger or acquisition. Ideally, you would want to do everything you can to get your level to be below the required amount to initiate a winding-up or bankruptcy order. Once you have managed to repay parts of your debt, your creditor may not be able to wind-up your company as the debt level is below the statutory requirement amount.





Serving a statutory demand is merely one way to show evidentiary evidence that a court should wind up a company. Even if a creditor has validly served a statutory demand,  a court may refuse to wind-up a company, for instance, if the court believes that it would be inequitable to do so. Serving a statutory demand has its own merits. It is a cost-effective solution to pressure a debtor to act quickly. However, creditors need to think carefully about whether this is the best business strategy. There may be other viable options that are more attractive than serving a statutory demand. In all cases, if you are thinking of serving, or have been served a statutory demand, seek legal advice immediately.


Please note that this is a general summary of the position under common law and does not constitute legal advice. As the laws of each jurisdiction may be different, you may wish to consult your lawyer.


Winding Up






Statutory Demand




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