A winding-up petition is a legal action commenced by a creditor against a company that owes them an unliquidated debt of more than £750. It is typically filed with the court and, if approved, can lead to the appointment of an insolvency practitioner to compulsorily liquidate the company’s assets and distribute the proceeds among all the creditors to repay the company’s debts.

If you are owed a debt

If you are frustrated with delayed payment and you have exhausted all attempts to obtain payment, serving a statutory demand can be a relatively impactful and cost-effective method of extracting sums owed to you from a defaulting party.

A statutory demand is defined by parts 7.2 and 7.3 of the Insolvency Rules 2016, as a written notice that requests payment of an outstanding debt that a company owes to a creditor. It essentially demands payment of a debt within 21 days of being served. It carries a threat of winding-up and can focus the mind of a debtor to ensure re-payment of the debt is expedited or to encourage engagement in settlement negotiations.

After 21 days of having been served with the demand, if the debtor has still failed to make payment of the debt (and has not claimed that the debt is disputed) you may file the petition with the Insolvency and Companies List. The petition will be considered by the court, which may at a hearing, dismiss it, adjourn it or make a winding-up order if it is satisfied that the debtor company cannot pay its debts.

In the event that a winding-up order is made, the court will appoint an official receiver to manage the liquidation process, including selling the company’s assets and paying off creditors.

However, it is important to note that issuing a statutory demand without taking expert legal advice can do more harm than good. If the debt is disputed on genuine grounds, there are significant risks to a creditor of serving a statutory demand as normal court proceedings would be the proper forum to hear the dispute.  The winding-up petition process is complex and should be approached with caution. Our expert lawyers can advise you as to the best approach in your specific case.

If you have received a Statutory Demand

If you have been served with a statutory demand, it is crucial that you act quickly. Within 21 days of having been served with the demand, the company must either pay the debt balance, negotiate payment terms, or if the alleged debt set out in the demand to be owing is genuinely disputed on substantial grounds, apply for an injunction to prevent the creditor from presenting a petition or advertising the same in The London Gazette.

Therefore, it is vital that you immediately take legal advice from experienced solicitors to avoid financial or reputational loss to the company. Find out more about defending winding-up proceedings here.

If you are engaged in a commercial dispute over an unpaid debt and have received a statutory demand or you are considering issuing a statutory demand over an unpaid debt owed to you or your company, get in touch with our experienced solicitors, who are best placed to advise you as to your best options.