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A statutory demand does not carry a fixed expiry date, but it goes stale. For individual debtors, the Insolvency Rules require a bankruptcy petition presented more than four months after service of the demand to explain the reasons for the delay, and the court may refuse to act on a stale demand. Best practice is to treat four months as the working window.
After personal service on an individual, the debtor has 18 days to apply to set the demand aside and 21 days to comply. Once 21 days have passed without payment, security or a set aside application, the creditor may present a bankruptcy petition, provided the debt is at least £5,000 under section 267 of the Insolvency Act 1986. Present promptly: a petition based on a demand served more than four months earlier must state the reasons for the delay, and unexplained staleness invites judicial criticism or refusal.
For company debtors there is no set aside procedure and no four month rule as such. Non compliance for three weeks with a demand for a debt exceeding £750 creates the statutory presumption that the company is unable to pay its debts under section 123(1)(a) of the Insolvency Act 1986, on which a winding up petition can be founded. Even so, the presumption is evidence of present insolvency, so a long delayed petition based on an old demand weakens the creditor’s position and hands the company an argument at the hearing.
Two disciplines preserve a demand’s force: impeccable service, evidenced by a certificate or affidavit from the server recording exactly how and when service was effected, and prompt escalation once the compliance period expires. If circumstances force delay, record the reasons contemporaneously so the petition can explain them. Our answer on what happens after a statutory demand is served covers the escalation sequence in full.
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