Statutory demands are often conflated with other debt recovery
mechanisms available to creditors. Whilst a statutory demand may,
in certain circumstances, be a useful tool in the debt recovery
kit, its primary function is to establish whether a company can pay
its debts as they fall due i.e. whether it satisfies the "cash
flow test".
In Guernsey, a company must pass both the cash flow and
balance sheet solvency tests to meet the definition of
solvency.
Pursuant to section 407 of the Companies (Guernsey)
Law, 2008 (the Companies Law), where a
statutory demand for payment of a due debt of more than
£750 has been formally served on the company and the
debt remains outstanding for 21 days after the demand has been
made, the company is deemed to be unable to pay its debts and
liable to be wound up.
