Home » Answers Hub » Demand or petition first
Usually the statutory demand, but not always. Non compliance with a demand for three weeks gives the creditor the statutory presumption of insolvency under section 123(1)(a) of the Insolvency Act 1986, making the petition straightforward. A petition can, however, be presented without any demand where the company’s inability to pay its debts can be proved another way, such as an unsatisfied judgment.
The demand route is cheap, fast and requires no court involvement: serve, wait 21 days, and either get paid, which is the most common outcome, or acquire clean evidence of insolvency for the petition. It also functions as a final warning that concentrates minds, and many demands are settled or negotiated within the three weeks precisely because the debtor understands what follows. The trade off is time, and the risk that a genuinely disputed debt surfaces, in which case proceeding exposes the creditor to costs.
Section 123(1)(e) allows a petition where it is proved that the company is unable to pay its debts as they fall due, and an unsatisfied judgment or returned execution provides other statutory routes. Creditors move directly where urgency is real, for example where assets appear to be moving, accepting the heavier evidential burden. Whichever route is taken, the petition itself must then be served strictly in accordance with Schedule 4 to the Insolvency Rules 2016, covered in our answer on serving petitions.
Serving a demand does not commit the creditor to petitioning; it creates leverage without obligation. Conversely, presenting a petition is a serious escalation with advertisement consequences that freeze the company’s banking, so it should be reserved for debts that will withstand scrutiny. Specialist insolvency solicitors advise on the choice; our role is to make whichever document is chosen land validly, first time, with evidence.
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