Statutory demands and insolvency-based recovery in Uganda
In brief
A statutory demand is a formal written demand for a debt under the Insolvency Act, Cap. 108. Its power is evidential: if the debtor fails to comply with a statutory demand, the debtor is presumed unable to pay its debts (s.2), which is a ground for liquidation of a company or bankruptcy of an individual. A debtor who disputes the debt may apply to set the demand aside (s.4). It is a recovery tool best used for clear, undisputed debts — not where the debt is genuinely disputed.
1. Governing law
The Insolvency Act, Cap. 108 makes a statutory demand a gateway to insolvency-based recovery. A 'statutory demand' is a demand made in accordance with section 3, and a debtor is presumed (unless the contrary is proved) to be unable to pay its debts where, among other things, the debtor has failed to comply with a statutory demand, or where execution on a judgment debt has been returned unsatisfied (s.2). On a petition for liquidation or a bankruptcy order, evidence of failure to comply with a statutory demand is admissible as evidence of inability to pay only if the petition is made within the time the Act allows after the date for compliance (s.2(2)). A debtor who disputes the debt may apply to set aside the statutory demand (s.4). Because non-compliance exposes a company to liquidation and an individual to bankruptcy, a statutory demand is a potent way to press a clear debt — but it is not a substitute for an ordinary suit where the debt is genuinely disputed, since a demand over a disputed debt risks being set aside. Statutory text verified against the consolidated Laws of Uganda as at 31 December 2023. Sourced from the Uganda Legal Information Institute (ulii.org).
2. Key statutes & rules
- Insolvency Act, Cap. 108 — s.2 (a debtor is presumed unable to pay its debts where it has failed to comply with a statutory demand, or where execution is returned unsatisfied; timing for using non-compliance as evidence on a petition); s.3 (statutory demand); s.4 (setting aside a statutory demand).
3. Practical guidance
Use a statutory demand for a clear, undisputed debt — its force is that non-compliance presumes inability to pay (s.2).
Make the demand in accordance with s.3 (the prescribed form and content) and serve it correctly.
Watch the timing: to rely on non-compliance on a liquidation or bankruptcy petition, petition within the time the Act allows after the compliance date (s.2(2)).
If you are served with a statutory demand and dispute the debt, apply promptly to set it aside (s.4).
If the debt is genuinely disputed, use an ordinary or summary suit instead — a statutory demand over a disputed debt may be set aside.
This note is a practitioner orientation, not legal advice, and does not create an advocate–client relationship. Ugandan law changes and chapter and section numbers were revised in the 2023 Laws of Uganda. Verify every statute, rule and authority against the current primary source — and the specific facts of your matter — before filing or relying on it.