A statutory demand is normally the first step that is taken by a creditor in the winding up of a company on the grounds of insolvency. 

The process of serving a statutory demand, and any subsequent winding up proceedings, can be an effective and legitimate process used by creditors to recover amounts owed by a debtor company (company).[1]

The statutory demand is one of the most frequently used (and misused) tools utilized by companies and other persons to obtain payment of debts owed to them by a company. Service of a statutory demand can be the first step towards placing insolvent companies into liquidation.

The consequences for a company that does not respond to the service of a statutory demand can be severe.

One of those consequences is that the company may find itself in the position where it is required to prove solvency before a court, in order to avoid a winding up.