What is a statutory demand, and when can it lead to winding up or bankruptcy?

What it is

A statutory demand is a notice served on a debtor stating the amount owed and requiring payment. It is different from an ordinary letter of demand: it is made under the Insolvency, Restructuring and Dissolution Act 2018 and, if ignored, has legal consequences of its own.

The law sets a minimum debt of S$15,000. (Exactly how the threshold is worded differs slightly between companies and individuals, so check with a lawyer if your debt is close to the line.)

The 21 days

Once served, the debtor has 21 days to pay the debt, secure it or reach a settlement with the creditor. If they do none of these, the law presumes that they are unable to pay their debts.

For a company, that presumption allows the creditor to apply to the General Division of the High Court to wind the company up. A liquidator is then appointed to collect and sell the company's assets and pay its creditors, and the company is eventually dissolved. For an individual, the creditor can apply for a bankruptcy order.

If you receive one

Take it seriously and get advice straight away. An individual who genuinely disputes the debt can apply to court to set the statutory demand aside, usually within 14 days of service.

Not for disputed debts

Courts do not allow the insolvency process to be used to pressure someone over a debt that is genuinely disputed. A winding up application based on a disputed debt is usually dismissed with costs as an abuse of process. If the debtor has a real defence, a normal court claim is the right route.