Jurisdiction(s):
United Kingdom

Related legal acts

Key definition

Insolvency definition

What does Insolvency mean? In practice, insolvency describes a financial state where a debtor cannot meet liabilities when due, triggering remedies such as administration, liquidation or bankruptcy and informing directors’ duties and avoidance claims. For companies in England & Wales, Scotland and Northern Ireland, the Insolvency Act 1986, s 123 sets two alternative tests: - Cash‑flow insolvency: an inability to pay debts as they fall due. The inquiry is practical and forward‑looking, not confined to today’s bills (Re Patrick & Lyon Ltd [1933] Ch 786; BNY Corporate Trustee Services Ltd v Eurosail [2013] UKSC 28). - Balance‑sheet insolvency: liabilities (including contingent and prospective liabilities) exceed assets on...

Statutory Demands for Company Debts: Purpose, When to Use (and Not), Content, Service and Winding‑Up Consequences (England and Wales)

Published by a LexisNexis Restructuring & Insolvency expert

Practice notes

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The purpose of a statutory demand

The purpose of a statutory demand is to demonstrate that a company cannot pay its debts, rather than the creditor relying on section 123(1)(e) or section 123(2) of the insolvency Act 1986 (IA 1986). A statutory demand is a written demand, in the prescribed form, for a debt over £750, served on a company by leaving it at the company’s registered office (IA 1986, s 123(1)(a)). This threshold is not altered by the increase in the bankruptcy level for bankruptcy petitions from £750 to £5,000 that came into force on 1 October 2015. If the statutory demand is left unpaid and is not disputed, the company is treated as unable to pay its debts, giving a creditor grounds to present a winding-up petition against the company.

When not to use a statutory demand

A statutory demand should not be used where:

there is a genuine dispute about the amount owed
the company has a cross-claim or counterclaim that equals or exceeds the sum due
the company has a reasonable excuse for non-payment, for example where payment is prohibited by law...

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Eleanor Holland

4 Stone Buildings

A barrister at 4 Stone Buildings, Eleanor has been recommended by Legal 500 as one of the top ten commercial litigation juniors under eight years' call, and is described as 'Good with clients, hardworking and a very nice person too'. Eleanor has a broad commercial Chancery practice, including insolvency, commercial disputes, shareholder disputes, and banking and finance. She provides practical advice tailored to meeting the client's objectives, and is particularly sought after for work involving complex legal questions. Eleanor regularly receives repeat instructions from solicitors' firms, and she works both alone and led by barristers (including silks) in and out of Chambers. Eleanor regularly accepts instructions with a German language element. Eleanor is also a CEDR-accredited mediator, offering a practical and constructive approach to parties wishing to explore settlement of their dispute. Eleanor is committed to the Bar's pro bono efforts, including through the Bar Council Pro Bono...

Karl Anderson

Barrister, 4 Stone Buildings

Described as a “charming and first rate junior who produces written work of exceptional quality” and as an “excellent tactician” with a “formidable intellect” who “adds great fire power to any legal team”, Karl maintains a broad commercial practice. He is ranked in the Legal 500 as a ‘Leading Junior’ in Banking and Finance (Band 3), Insolvency (Band 4), and Civil Fraud (Band 4), and in Chambers and Partners as ‘Up and Coming’ in Company and Civil Fraud. Karl has extensive experience as a High Court trial advocate. Described as a “skilled and efficient cross-examiner” who “holds his own as an advocate” and who “has a fine delivery style and builds up a nice rapport with judges”, Karl has conducted multiple trials as sole counsel. In addition, Karl is regularly instructed as part of a larger counsel team in complex and high value claims in both the...

Web page updated on 28/05/2026

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