Some debtors can pay but have decided you won't escalate. Insolvency-based recovery changes that. Unpaid, the debt becomes a threat to the debtor's business, not just an annoyance. Used correctly on undisputed debts, a statutory demand or winding-up petition is one of the strongest tools available. Used wrongly, it can backfire, so we assess every case first.
Statutory demand
A statutory demand is a formal notice requiring payment of an undisputed debt. The debtor has 21 days to pay or reach an agreement. If they don't, that can support a winding-up petition against a company or a bankruptcy application against an individual.
Winding-up petition
Where a company owes more than £750 and can't or won't pay, a creditor can petition the court to wind it up. Once a petition is advertised, it's public. Banks commonly freeze the company's accounts, and its other creditors, lenders and customers can find out. The prospect alone can prompt payment. But a petition is a serious step, and we only recommend it where it's proportionate.
Current court costs (from GOV.UK at the time of writing): a £352 court fee plus a £2,600 petition deposit. We confirm current fees before you approve anything.
When these tools are not appropriate
Every instruction starts with our due diligence. Any escalation to insolvency action needs your written authorisation, with costs set out in advance.
Scotland
Scotland has its own insolvency procedure, but a company that can't pay a debt of more than £750 can also be wound up there. See Debt Recovery in Scotland.
When a customer is being struck off or is insolvent
If a customer that owes you money is being struck off the register or has entered insolvency, act quickly. The steps you can take depend on the stage the company has reached.
Warning signs to watch for
Check the company on Companies House as soon as you see any of these.
If the company is being struck off
When a company applies to be struck off, a notice is published in The Gazette. The company must also send a copy to anyone who could be affected, including creditors. If nobody objects, the company is usually struck off about two months after the notice (in some cases sooner).
As a creditor you can object, but only after the Gazette notice is published and before the company is struck off. You can object online through a Companies House account. If you object by email or post, the objection must arrive at least two weeks before the strike-off date. Include supporting documents less than six months old, such as invoices showing the company owes you money. If the objection succeeds, the company won't be struck off for another six months. Use that time to recover the debt: Companies House is unlikely to extend the deadline just because you've sent another invoice, but it may if you've started legal action.
If the company is in liquidation or administration
An insolvency practitioner is appointed to deal with the company's affairs. Known creditors are normally contacted, but don't wait:
VAT bad debt relief
If you have already paid VAT to HMRC on an invoice that won't be paid, you may be able to claim it back. The main conditions in HMRC's VAT Notice 700/18:
Check the full notice on gov.uk or with your accountant before claiming.
General information, not legal or tax advice.
Frequently asked questions
Does a statutory demand have to go through court? No. It's served directly on the debtor. What follows, a winding-up petition or bankruptcy application, does go to court.
What if the debtor pays after the petition is issued? Debtors sometimes pay at this stage. We'll advise on withdrawing the petition and recovering costs.
Related: Due Diligence · CCJ Enforcement · High-Value Debt Recovery · Our Services
Debtor refusing to pay a clear debt? Talk to us or call 01527 369593.