Is your business suitable for the stock market?

In this guide:

  • Is your business suitable for the stock market?

    Before you consider floating your business on the stock market, you need to determine whether it is suitable life on a public market.

    Before you consider floating your business on the stock market, you need to determine whether it is ready for life on a public market.

    Investors will only be interested in buying shares in companies that have secure earning streams and strong growth prospects. They will look for a good rate of return on any investment but will require a higher rate of return from an unproven, smaller business than from a large established company to compensate for the greater risks involved.

    It is harder to guarantee a successful investment in companies new to the market. Smaller companies are more likely to suffer if market or financial conditions change - making investment in them risky.

    You will need to consider whether your business can deliver that rate of return. You should ask yourself whether:

    • your business has a strong record of delivering profits and growth
    • your sector is attractive to investors
    • your business plan sets out how you will deliver strong growth in earnings in the future
    • your management team is up to the task of delivering the performance required

    See tailor your business plan to secure funding.

    If you feel your business is not at the right stage of development or will not be able to meet investor expectations of growth, you may want to consider other financing options - see business financing options: an overview.

    The London Stock Exchange provides guidance for companies that are considering flotation on the stock market.

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  • Advantages and disadvantages of stock market flotation

    Stock market flotation can help you raise capital and realise your investment but may undermine your control of the business - consider the advantages and disadvantages.

    Even if your business is suited to flotation, it may not be the right choice for you. Being a public company can present a range of benefits to your business, but there are also issues that might require careful consideration.

    Advantages of stock market flotation

    The benefits of stock market flotation could include:

    • Giving access to new capital to develop the business.
    • Making it easier for you and other investors - including venture capitalists - to realise their investment.
    • Allowing you to offer employees extra incentives by granting share options - this can encourage and motivate your employees to work towards long-term goals.
    • Placing a value on your business.
    • Increasing your public profile, and providing reassurance to your customers and suppliers.
    • Allowing you to do business, eg acquisitions, by using quoted shares as currency.
    • Creating a market for the company's shares.

    Disadvantages of stock market flotation

    However, you should also consider the following potential problems:

    • Market fluctuations - your business may become vulnerable to market fluctuations beyond your control - including market sentiment, economic conditions or developments in your sector.
    • Cost - the costs of flotation can be substantial and there are also ongoing costs of being a public company, such as higher professional fees.
    • Responsibilities to shareholders - in return for their capital, you will have to consider shareholders' interests when running the company - which may differ from your own objectives.
    • The need for transparency - public companies must comply with a wide range of additional regulatory requirements and meet accepted standards of corporate governance including transparency, and needing to make announcements about new developments.
    • Demands on the management team - managers could be distracted from running the business during the flotation process and through needing to deal with investors afterwards.
    • Investor relations - to maximise the benefits of being a public company and attract further investor interest in shares, you will need to keep investors informed.

    For further information, the London Stock Exchange highlights what you need to consider if you are interested in flotation.

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  • The process of floating your business on a stock market

    Getting ready for a flotation - ensuring legal and regulatory compliance and making key information available.

    When seeking to join a stock market, your business will be subject to legal and financial due diligence to help attract investor interest and to fulfil the entry requirements and documentation of the relevant market.

    Access guidance from the London Stock Exchange on admission standards and listing your business on the stock market.

    Your business also needs to have the right legal structure. The legal structure of a sole trader or a partnership is not suitable for a public market listing and as such a change to the company's legal structure would be necessary.

    Public companies have different obligations to private companies under the Companies Act 2006. For example, private companies are no longer required to hold an annual general meeting (AGM) though they may opt to do so or be required to hold one if sufficient shareholders demand one. However, all public companies and private companies with traded shares must hold an AGM.

    You will also have to make the following key information available:

    • who the directors are and what service contracts they have with the company
    • who the major shareholders are and details of the new and existing shares being offered for sale
    • information on the company's key contracts
    • the memorandum and articles of association

    Typically, the admission process may take between three and six months to complete. To help with this process, you will need to appoint a set of advisers with relevant experience in helping businesses seek capital via the public markets.

    Read more on the main market rules.

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  • Appoint advisers for successful flotation

    The advisers you need for a flotation including corporate advisers, stockbrokers, corporate lawyers and accountants.

    Getting the right advisers is key to a successful flotation. They are the experts who will guide you through the demanding legal, regulatory, financial and marketing processes.

    A corporate finance adviser will be the central adviser to your company during the admission process and throughout your company's life on a public market. A range of other advisers will also play integral roles in supporting you through the admission process and thereafter. These include a broker, a reporting accountant, and legal, public relations and investor relations companies.

    Bad advice, or using an adviser with a poor reputation, could seriously affect your business' reputation, ability to attract investors and float successfully.

    Advisers' professional fees, which can run into six-figure sums depending on the size of the flotation, will be the main cost in floating your business.

    Adviser roles

    Most companies seeking a flotation use a corporate adviser to guide them through the process. The corporate adviser makes the application to join the stock market on behalf of the company. They are responsible for ensuring all the information in the application is complete and dealing with any requests for additional information.

    • Companies floating on AIM must appoint a nominated adviser (nomad) who is approved by the London Stock Exchange to act in such a capacity - see London Stock Exchange search for nominated advisers.
    • You'll also need a stockbroker to generate interest in your business in the investment community.
    • Your corporate lawyer will be responsible for the due diligence process and for verifying statements in the prospectus and other documents.
    • An accountant will be needed to conduct the financial due diligence and prepare any financial statements needed for the admission documents. You will also need to appoint the services of a corporate broker to seek investor interest in your business - the key reason for floating on a stock market.
    • For large-scale floats it's also worth considering the services of a financial public relations company to reach wider audiences of investors.
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Six sources of equity finance

In this guide:

  • What is equity finance and is it right for your business?

    Work out whether equity finance can provide the finance you want for your business.

    Equity finance is capital invested in a business in return for a share of ownership or an element of control of the business.

    Unlike lenders, equity finance investors don't have the legal right to charge interest or to be repaid by a particular date. Instead they expect to make a gain on capital depending on the growth and profitability of the business.

    Because equity investors share the risks your business faces, equity finance is often referred to as risk capital.

    Is equity finance right for your business?

    Different forms of equity finance suit different business situations.

    It is likely to be most suitable where:

    • the nature of a project does not suit bank loans or other forms of debt finance
    • the business will not have enough cash to pay loan interest because it is needed for core activities or funding growth

    Questions to ask yourself include:

    • Are you prepared to give up a share in your business and some control? Investors expect to monitor progress and many seek involvement in significant decisions.
    • Are you and your key people confident in the business' product/service? Does it have a unique selling point that singles it out?
    • Do you have the drive to grow the business?
    • What industry experience and knowledge does your management team have? Is there a variety of skills?

    Due the risk to their funds, investors expect a higher potential return than for safer, more secure investments.

    After considering the above, seek advice from a professional, eg your accountant, business adviser or local enterprise agency.

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  • Six sources of equity finance

    Outline of the various sources of equity finance available to businesses.

    There are various sources of equity finance, including:

    1. Business angels

    Business angels (BAs) are wealthy individuals who invest in high growth businesses in return for a share in the business. Some BAs invest on their own or as part of a network. BAs are often experienced entrepreneurs and in addition to money, they bring their own skills, knowledge and contacts to the company.  See business angels.

    2. Venture capital

    Venture capital is also known as private equity finance. Venture capitalists (VCs) look to invest larger sums of money than BAs in return for equity.

    Venture capital is most often used for high-growth businesses destined for sale or flotation on the stock market. See venture capital.

    3. Crowdfunding

    Crowdfunding is where a number of people each invest, lend or contribute small amounts of money to your business or idea. This money is combined to help you reach your funding goal. Each individual that backs your idea will usually receive rewards or financial gain in return. See crowdfunding.

    4. Enterprise Investment Scheme (EIS)

    Some limited companies can raise funds under the EIS. The scheme applies to small companies carrying on a qualifying trade.

    There are potential tax advantages for individuals who invest in such companies, such as:

    • the buyer of the shares gets income tax relief on the cost of the shares
    • Capital Gains Tax (CGT) on the sale of other assets can be deferred if the gain is reinvested into EIS shares

    Certain conditions must be met for a company to be a qualifying company and for an investor to be eligible for tax relief - see HM Revenue & Customs (HMRC) EIS guidance.

    5. Alternative Platform Finance Scheme

    If your small business is struggling to access bank finance, there is now a new government scheme in which the UK's biggest banks will pass on details of any businesses they have rejected to three alternative finance providers. These are:

    6. The stock market

    Joining a public market or stock market is another route through which equity finance can be raised. A stock market listing can help companies access capital for growth and raise finance for further development - see London stock exchange: main market.

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  • Equity finance: the equity gap

    What the equity gap is, how you could avoid it, and guidance on Enterprise Capital Funds.

    The equity gap is a term used to explain the gap a company experiences in funding as it moves up the ladder of different finance sources.

    For example, some businesses require much greater funding than that which can be provided by business angels, but do not need the levels of funding venture capitalists would consider. The gap between these two finance situations is known as the equity gap.

    Businesses in this situation may wish to approach private equity firms for help. These are organisations that invest and manage investments and they tend to focus on management buy-outs and buy-ins.

    The government provides a multi-million pound equity finance scheme to close the equity gap by providing Enterprise Capital Funds (ECFs).

    The ECF programme helps those looking to operate in the UK market to raise venture capital funds specifically targeting early-stage small businesses believed to have long-term growth potential - see British Business Bank information on ECFs.

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  • Advantages and disadvantages of equity finance

    Discover the benefits and drawbacks of the use of equity finance or share capital in your business.

    Equity finance, the process of raising capital through the sale of shares in a business, can sometimes be more appropriate than other sources of finance, eg bank loans - but it can place different demands on you and your business.

    Advantages of equity finance

    Raising money for your business through equity finance can have many benefits, including:

    • The funding is committed to your business and your intended projects. Investors only realise their investment if the business is doing well, eg through stock market flotation or a sale to new investors.
    • You will not have to keep up with costs of servicing bank loans or debt finance, allowing you to use the capital for business activities.
    • Outside investors expect the business to deliver value, helping you explore and execute growth ideas.
    • Some business angels and venture capitalists can bring valuable skills, contacts and experience to your business. They can also assist with strategy and key decision making.
    • Like you, investors have a vested interest in the business' success, ie its growth, profitability and increase in value.
    • Investors are often prepared to provide follow-up funding as the business grows.

    Disadvantages of equity finance

    However, there are drawbacks of equity finance too. It's worth considering that:

    • Raising equity finance is demanding, costly and time consuming, and may take management focus away from the core business activities.
    • Potential investors will seek comprehensive background information on you and your business. They will look carefully at past results and forecasts and will probe the management team. However, many businesses find this process useful, regardless of whether or not any fundraising is successful.
    • Depending on the investor, you will lose a certain amount of your power to make management decisions.
    • You will have to invest management time to provide regular information for the investor to monitor.
    • At first you will have a smaller share in the business - both as a percentage and in absolute monetary terms. However, your reduced share may become worth a lot more in absolute monetary terms if the investment leads to your business becoming more successful.
    • There can be legal and regulatory issues to comply with when raising finance, eg when promoting investments.

    For further information on the different ways to raise money for your business see business financing options: an overview.

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  • Alternatives to equity finance

    Loans and government support are possible alternatives to equity finance.

    Equity finance may not suit your business. For example, you may not feel happy about losing a degree of control, or the intended project may be too small to be an attractive investment opportunity.

    Consider the following alternatives:

    • Loans - there are many options available, from commercial mortgages secured against your business assets to short-term borrowing for periods of between three and five years.
    • Overdrafts - overdrafts can be expensive but are a flexible form of borrowing. They're not especially suitable for long-term finance as they are repayable on demand. 
    • Loans from family and friends - these can be a sound method of raising finance, but beware of potential damage to relationships if the money isn't repaid on time. 
    • Additional funds - from you or your fellow partners/directors.
    • Government support - there are government support schemes that may help your business as well as private sector initiatives. Search our business support finder for grants, loans, expertise and advice for which your business may be eligible.
    • Joint ventures - these can take many different forms. The term normally applies to the co-operation of two or more individuals or businesses in a specific enterprise rather than in a continuing relationship. 
    • Credit cards - these are a quick way of raising finance and a flexible form of borrowing. However, unless you can manage your cards very carefully to avoid paying interest and other fees, they are not suitable for long-term finance. 

    Mezzanine finance

    Mezzanine funding combines elements of debt and equity finance and can provide access to bank funding that the business may not have otherwise been able to obtain. Under mezzanine funding a provider charges interest on the debt and also takes a share of profits when a company grows.

    Mezzanine arrangements do not involve issuing shares to the lender and do not affect the value of the company's shares. Debts are usually repaid in a single payment and can be expensive, as the one-off repayment will involve a large sum of money which would affect businesses that have failed to fulfil their growth strategies.

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  • Secure equity investment: six top tips

    Top tips on securing equity investment for your business.

    Equity finance is a way of raising money from external investors in return for a share of your business.  There are two main providers of equity finance for private businesses - venture capitalists and business angels.

    If you have a business with high-growth potential, but you are finding it difficult to obtain bank finance then equity finance may be an option for you - follow these tips:

    Target the right equity investor for your business

    Approach investors who are seeking to invest in a business that is at your stage of development. Research potential investors that are interested in your sector and want to invest the amount of finance that you require.

    Prepare a realistic business plan

    Provide details of how you are going to develop your business, when you are going to do it, who will be involved and how you will manage the finances. Demonstrate that you're fully aware of the marketplace that you're operating in and show financial projections to support what you have said.

    Value your business accurately

    Potential investors will need to know what your business is worth before they consider investing in it. Calculate the value of your business' assets, complete a market comparison with similar businesses and analyse your potential cashflow to provide an accurate value of your business.

    Prepare to pitch

    Deliver an informative, relevant and engaging presentation. Anticipate the questions and concerns that investors may have and show the benefits of their involvement in your business. Investors will be interested in your personality too, so be enthusiastic and passionate about your business and its potential, without being unrealistic about its prospects.

    Communicate effectively and honestly

    Communicate clearly about what your business is, what it is trying to achieve, how much money is needed to make it a reality, and what you will deliver and when. Answer all questions that are directed at you and be prepared for probing questions.

    Negotiate investment terms

    If an investor is interested in collaborating with you, you can start negotiating key issues including respective responsibilities, growth targets, the investor's exit strategy and service contracts. You should also specify how the investment relationship will be managed and what involvement they'll have in the company.

    For further advice, see secure equity investment.

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Complaining about disqualified directors or undischarged bankrupts

In this guide:

  • What disqualified directors and undischarged bankrupts cannot do

    Restrictions on undischarged bankrupts and those subject to bankruptcy restrictions orders and undertakings.

    Disqualified directors are not allowed to act as a company director or be involved in the promotion, management or formation of a limited company without High Court permission. The ban applies to all registered and unregistered companies formed in England, Wales, Northern Ireland and Scotland. The ban also applies to foreign companies that are registered in the UK.

    Undischarged bankrupts and persons subject to bankruptcy restrictions as a result of a bankruptcy restrictions order (BRO) or bankruptcy restrictions undertaking (BRU) are not allowed to:

    • engage - whether directly or indirectly - in any business under a name other than that in which they were made bankrupt without disclosing that name to all persons with whom they enter into any business transaction
    • act as director of a company - or directly or indirectly take part in or be concerned in the promotion, formation or management of a company - without High Court permission
    • obtain credit of £500 or more - without disclosing that they are subject to bankruptcy restrictions
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  • Check if a director has been disqualified or if an individual is bankrupt

    Using the Companies House Disqualified Directors Register, and contacting the Insolvency Service.

    Disqualified Directors Register

    Before reporting any breach of disqualification to The Insolvency Service, you should check the Disqualified Directors Register to ensure the director has been disqualified.

    The Disqualified Directors Register is kept by Companies House on behalf of the Secretary of State and lists all directors that are currently prohibited from involving themselves with a company.

    Individual Voluntary Arrangement, Bankruptcy Restrictions Order/Undertaking and Debt Relief Order and Debt Relief Restrictions Order/Undertaking Register

    Before reporting any breach of bankruptcy or bankruptcy restrictions to The Insolvency Service, you should check the DRO, BRO and IVA Register to ensure the person is not subject to any such proceedings.

    Reporting disqualified directors, undischarged bankrupts and persons subject to bankruptcy restrictions

    If you suspect that an individual is acting in breach of a disqualification order, a disqualification undertaking or a bankruptcy order, you should contact the Insolvency Service.

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  • Complaining about disqualified directors or undischarged bankrupts

    Ways to submit a complaint to The Insolvency Service, and what happens after your complaint is submitted.

    If you report any evidence of a breach by a disqualified director, an undischarged bankrupt or a person subject to bankruptcy restrictions to the Insolvency Service, you should provide the following information if you know it:

    • the name of the person you are complaining about
    • details of any company that the person is involved with
    • details of any credit the person has obtained
    • details of any failure by the person to disclose their bankruptcy name
    • your own name and details
    • your company's details, if you are complaining on behalf of one
    • how you found out this information
    • others who can confirm this information

    You can pass on this information over the telephone by calling the Insolvency Service on Tel 028 9054 8531.

    Make a complaint to the Insolvency Service online with the Department for the Economy (DfE).

    If you submit your complaint by post, you should send it to the following address:

    The Insolvency Service
    Fermanagh House
    Ormeau Avenue
    Belfast
    BT2 6NJ

    You can also send the form to the Insolvency Service by email to insolvency@economy-ni.gov.uk.

    Process after reporting a bankrupt or a director

    When you have submitted your complaint, the Insolvency Service will acknowledge your complaint and conduct enquiries into the allegations.

    If these enquiries indicate that an offence may have been committed, a report will be submitted to the PSNI. You should note that you may be asked to give a formal written statement confirming the information you previously provided to the Insolvency Service.

    If you wish to submit an anonymous complaint, the Insolvency Service may be able to pass the matter to the relevant prosecuting authority. However, you should note that they may not be able to proceed in the absence of suitable evidence and/or an appropriate witness.

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Taking your case to the Ombudsman

In this guide:

What to do if you are served with a statutory demand

In this guide:

  • What is a statutory demand

    What a statutory demand is and how long it can last.

    If a creditor is owed money, they can issue a statutory demand. A statutory demand is a formal written request that a debt must be paid.

    An individual or business that receives a statutory demand has 21 days to:

    • settle the debt
    • secure the debt - reach an agreement for payment

    If you are an individual and you have been served with a statutory demand, you can ask the High Court to 'set aside' (dismiss) the demand. If you wish to do this, your application to the Court to have the demand set aside must be made within 18 days from the date on which the statutory demand was served on you. In the case of a company, an injunction can be sought to restrain the creditor from petitioning for winding up or appointing an administrator. 

    If the debt is not paid the creditor can: 

    • in the case of personal debts, including debts incurred as a sole trader or when trading in partnership with someone else, present a petition to the High Court for a bankruptcy order if the debt is for over £5,000 
    • in the case of company debts, present a petition to the Court for a winding-up order, if the debt  is for over £750

    To find out how to serve a statutory demand see serving a statutory demand.

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  • Serving a statutory demand

    How to serve a statutory demand depending on who you are serving it on.

    How you serve a demand varies according to who you are serving it on - whether an individual or a company.

    Individual or sole trader

    If an individual or a sole trader owes you money, you must do everything you can to bring the statutory demand to the attention of the person concerned and, if possible, serve it personally.

    You can employ a process server to do this for you - a process server serves court and legal documents on behalf of:

    • solicitors
    • lawyers
    • local authorities
    • government agencies
    • companies
    • private individuals

    Registered limited company

    If a registered limited company owes you money, you can serve a statutory demand by delivering it to the company's registered office. If you cannot do this, you can send one by registered post. The demand will be properly served if the company acknowledges it by signing the Post Office receipt.

    Unregistered limited company

    If an unregistered limited company owes you money, you may serve the statutory demand by:

    • leaving it at the company's main place of business
    • delivering it to the company secretary, manager or principal officer of the company
    • serving it in a way directed or approved by the court
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  • Information a statutory demand should contain

    The required contents of a statutory demand, and the forms you need to use.

    A statutory demand must explain to the debtor:

    • the purpose of the demand
    • what will happen if they fail to comply within the 21-day time limit
    • the time and manner in which the demand must be complied with
    • if the debtor is an individual, their right to apply to the High Court to have the statutory demand set aside (dismissed)

    The demand must also include the contact details of a named individual with whom the debtor can communicate regarding the debt.

    You - or someone authorised to sign on your behalf - must sign and date the demand. It must state:

    • the amount of the debt and the consideration for it - if there was no consideration, then it must detail the way in which the debt arose
    • if the debtor is an individual
      • whether the debt is payable immediately or at a future date
      • details of the unsatisfied judgment or - if none - the basis for the creditor's belief that the debtor appears to have no reasonable prospect of being able to pay

    What forms should I use to issue a statutory demand?

    To issue a statutory demand, you must complete the relevant form. The forms vary according to who you're serving the demand on and the circumstances surrounding the debt.

    If you're serving a demand on an individual, including a sole trader, you need to use the appropriate forms. The Department for the Economy (DfE) provides statutory forms that you can download, including:

    Form 4.01 should be used in the case of a debt due from a registered or unregistered company.  

    If you own a business that has been served a statutory demand, see what to do if you are served with a statutory demand.

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  • Proof of serving a statutory demand

    When you need to prove you have served a statutory demand, and when you may need a statement of truth.

    If the debtor does not pay the statutory demand and you intend to carry on with debt-recovery proceedings, you will need to prove you have served the demand. One option is to employ a process server. A process server serves court and legal documents on behalf of:

    • solicitors
    • lawyers
    • local authorities
    • government agencies
    • companies
    • private individuals

    If you're intending to present a petition for a bankruptcy order based on a statutory demand, the total debt must be more than £5,000. If you're intending to present a petition for a winding-up order based on a statutory demand, the total debt must be more than £750. However, a number of creditors for smaller amounts can put their claims together to reach this minimum.

    You can ask the High Court to make a bankruptcy order or winding-up order:

    • if the debtor does not settle the debt or reach an agreement for payment within 21 days from the date of service of the statutory demand, or 
    • if the debtor is an individual, they do not ask the Court to set aside (dismiss) the demand within 18 days from the date of service of the statutory demand, or 
    • if the debtor is a company, an injunction is not sought to prevent the company being wound up or placed in administration
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  • What to do if you are served with a statutory demand

    Your options if you receive a statutory demand, and the grounds for a demand to be dismissed

    You should never ignore a statutory demand. If you are an individual and the debt is for £5,000 or more, it could lead to you being made bankrupt. If you own a company and the debt is for £750 or more it could lead to your company being wound up by the High Court.

    To avoid this, you must comply with the statutory demand within 21 days. You can either settle the debt or secure it by reaching an agreement for payment. If you dispute it, you should take action to stop the creditor presenting a bankruptcy or winding-up petition.

    Disagreeing with a statutory demand

    If you are an individual you have 18 days from when the statutory demand is served on you to apply to the High Court for the statutory demand to be set aside - dismissed or cancelled. If the debt is owed by a company you own you should seek legal advice about obtaining an injunction to prevent the company being wound up or placed in administration at the earliest opportunity. 

    Application to set aside a statutory demand

    If you want to apply to set aside a statutory demand, and the debt is owed by you personally and not by a company you must apply to the High Court using form 6.04 and form 6.05. The application must be accompanied by four copies. The Department for the Economy (DfE) provides links to all insolvency and bankruptcy forms.

    From the time you file the application to set aside the statutory demand the deadline for you to comply with it stops running.

    Provided an application to set aside the statutory demand is not dismissed immediately, the Court will fix a time for hearing the application, enter this each of the four copies of the application and seal and return them to you. You must then give at least seven days' notice of the hearing to:

    • the creditor
    • whoever is named in the statutory demand as the person with whom the debtor may enter into communication

    by sending them a sealed copy of the application. 

    Setting aside a statutory demand (if you owe the debt as an individual)

    The High Court has various grounds for setting aside a statutory demand - it may grant an application for setting aside if:

    • the debtor appears to have a counter-claim, set-off or cross demand equal to or greater than the debt they owe
    • the debt is disputed on grounds the Court considers to be substantial
    • it appears that the creditor has not disclosed some security or the Court is satisfied that the value of the security is greater than or equal to the amount claimed
    • the Court is satisfied on other grounds that the demand ought to be set aside

    If the High Court dismisses your application, the deadline for you to pay or secure the debt will restart from the day your application is dismissed. The Court will make an order authorising the creditor to present a bankruptcy petition either forthwith or from a specified date and you must send a copy of this order to the creditor who served the statutory demand on you. 

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Information a statutory demand should contain

In this guide:

  • What is a statutory demand

    What a statutory demand is and how long it can last.

    If a creditor is owed money, they can issue a statutory demand. A statutory demand is a formal written request that a debt must be paid.

    An individual or business that receives a statutory demand has 21 days to:

    • settle the debt
    • secure the debt - reach an agreement for payment

    If you are an individual and you have been served with a statutory demand, you can ask the High Court to 'set aside' (dismiss) the demand. If you wish to do this, your application to the Court to have the demand set aside must be made within 18 days from the date on which the statutory demand was served on you. In the case of a company, an injunction can be sought to restrain the creditor from petitioning for winding up or appointing an administrator. 

    If the debt is not paid the creditor can: 

    • in the case of personal debts, including debts incurred as a sole trader or when trading in partnership with someone else, present a petition to the High Court for a bankruptcy order if the debt is for over £5,000 
    • in the case of company debts, present a petition to the Court for a winding-up order, if the debt  is for over £750

    To find out how to serve a statutory demand see serving a statutory demand.

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  • Serving a statutory demand

    How to serve a statutory demand depending on who you are serving it on.

    How you serve a demand varies according to who you are serving it on - whether an individual or a company.

    Individual or sole trader

    If an individual or a sole trader owes you money, you must do everything you can to bring the statutory demand to the attention of the person concerned and, if possible, serve it personally.

    You can employ a process server to do this for you - a process server serves court and legal documents on behalf of:

    • solicitors
    • lawyers
    • local authorities
    • government agencies
    • companies
    • private individuals

    Registered limited company

    If a registered limited company owes you money, you can serve a statutory demand by delivering it to the company's registered office. If you cannot do this, you can send one by registered post. The demand will be properly served if the company acknowledges it by signing the Post Office receipt.

    Unregistered limited company

    If an unregistered limited company owes you money, you may serve the statutory demand by:

    • leaving it at the company's main place of business
    • delivering it to the company secretary, manager or principal officer of the company
    • serving it in a way directed or approved by the court
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  • Information a statutory demand should contain

    The required contents of a statutory demand, and the forms you need to use.

    A statutory demand must explain to the debtor:

    • the purpose of the demand
    • what will happen if they fail to comply within the 21-day time limit
    • the time and manner in which the demand must be complied with
    • if the debtor is an individual, their right to apply to the High Court to have the statutory demand set aside (dismissed)

    The demand must also include the contact details of a named individual with whom the debtor can communicate regarding the debt.

    You - or someone authorised to sign on your behalf - must sign and date the demand. It must state:

    • the amount of the debt and the consideration for it - if there was no consideration, then it must detail the way in which the debt arose
    • if the debtor is an individual
      • whether the debt is payable immediately or at a future date
      • details of the unsatisfied judgment or - if none - the basis for the creditor's belief that the debtor appears to have no reasonable prospect of being able to pay

    What forms should I use to issue a statutory demand?

    To issue a statutory demand, you must complete the relevant form. The forms vary according to who you're serving the demand on and the circumstances surrounding the debt.

    If you're serving a demand on an individual, including a sole trader, you need to use the appropriate forms. The Department for the Economy (DfE) provides statutory forms that you can download, including:

    Form 4.01 should be used in the case of a debt due from a registered or unregistered company.  

    If you own a business that has been served a statutory demand, see what to do if you are served with a statutory demand.

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  • Proof of serving a statutory demand

    When you need to prove you have served a statutory demand, and when you may need a statement of truth.

    If the debtor does not pay the statutory demand and you intend to carry on with debt-recovery proceedings, you will need to prove you have served the demand. One option is to employ a process server. A process server serves court and legal documents on behalf of:

    • solicitors
    • lawyers
    • local authorities
    • government agencies
    • companies
    • private individuals

    If you're intending to present a petition for a bankruptcy order based on a statutory demand, the total debt must be more than £5,000. If you're intending to present a petition for a winding-up order based on a statutory demand, the total debt must be more than £750. However, a number of creditors for smaller amounts can put their claims together to reach this minimum.

    You can ask the High Court to make a bankruptcy order or winding-up order:

    • if the debtor does not settle the debt or reach an agreement for payment within 21 days from the date of service of the statutory demand, or 
    • if the debtor is an individual, they do not ask the Court to set aside (dismiss) the demand within 18 days from the date of service of the statutory demand, or 
    • if the debtor is a company, an injunction is not sought to prevent the company being wound up or placed in administration
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  • What to do if you are served with a statutory demand

    Your options if you receive a statutory demand, and the grounds for a demand to be dismissed

    You should never ignore a statutory demand. If you are an individual and the debt is for £5,000 or more, it could lead to you being made bankrupt. If you own a company and the debt is for £750 or more it could lead to your company being wound up by the High Court.

    To avoid this, you must comply with the statutory demand within 21 days. You can either settle the debt or secure it by reaching an agreement for payment. If you dispute it, you should take action to stop the creditor presenting a bankruptcy or winding-up petition.

    Disagreeing with a statutory demand

    If you are an individual you have 18 days from when the statutory demand is served on you to apply to the High Court for the statutory demand to be set aside - dismissed or cancelled. If the debt is owed by a company you own you should seek legal advice about obtaining an injunction to prevent the company being wound up or placed in administration at the earliest opportunity. 

    Application to set aside a statutory demand

    If you want to apply to set aside a statutory demand, and the debt is owed by you personally and not by a company you must apply to the High Court using form 6.04 and form 6.05. The application must be accompanied by four copies. The Department for the Economy (DfE) provides links to all insolvency and bankruptcy forms.

    From the time you file the application to set aside the statutory demand the deadline for you to comply with it stops running.

    Provided an application to set aside the statutory demand is not dismissed immediately, the Court will fix a time for hearing the application, enter this each of the four copies of the application and seal and return them to you. You must then give at least seven days' notice of the hearing to:

    • the creditor
    • whoever is named in the statutory demand as the person with whom the debtor may enter into communication

    by sending them a sealed copy of the application. 

    Setting aside a statutory demand (if you owe the debt as an individual)

    The High Court has various grounds for setting aside a statutory demand - it may grant an application for setting aside if:

    • the debtor appears to have a counter-claim, set-off or cross demand equal to or greater than the debt they owe
    • the debt is disputed on grounds the Court considers to be substantial
    • it appears that the creditor has not disclosed some security or the Court is satisfied that the value of the security is greater than or equal to the amount claimed
    • the Court is satisfied on other grounds that the demand ought to be set aside

    If the High Court dismisses your application, the deadline for you to pay or secure the debt will restart from the day your application is dismissed. The Court will make an order authorising the creditor to present a bankruptcy petition either forthwith or from a specified date and you must send a copy of this order to the creditor who served the statutory demand on you. 

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    Wind up a limited company that owes you money
    Owed money from a bankrupt or a company in liquidation
    Recover debt through Court
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