Statutory Demand

What is a statutory demand?

A statutory demand can be used by an individual or organisation to ask for money owed from a person or business.

1. Statutory demand - Limited Company: A statutory demand can be used as a first step in the process of winding up a company if the debt owed is considered to be legally enforceable and is  £750 or more.
   
   

2. Statutory demand - Sole trader/Partnership/Individual: A statutory demand can be used as a first step in the process of starting bankruptcy proceedings if the debt owed is considered to be legally enforceable and is  £5000 or more.

Once a statutory demand has been served, the debtor has a limited period of time in which to either pay the debt in full or reach an arrangement with the creditor to pay it off over time.If the debt is not paid or an arrangement is not reached, the creditor may then take further legal action, including applying to the court for a winding up order or a bankruptcy petition. 

Statutory Demand Process

Here is a step-by-step guide to the statutory demand process in the UK:

1. Issuing the statutory demand: A creditor can issue a statutory demand to a debtor if the debt is considered to be legally enforceable. The demand must be in writing, in the prescribed form, and must specify the amount of the debt and the deadline for payment. The demand must be served on the debtor personally or by post.
   
   

2. Response time: You have 21 days from the date of service to either pay the debt in full or reach an arrangement with the creditor to pay it off over time. If the debt is not paid, you can apply to have the statutory demand set aside if you have a counterclaim, set-off or cross-demand that is equal to or greater than the amount of the debt.
   
   

3. Setting aside the statutory demand: If the debtor wishes to set aside the statutory demand, they must make an application to the court within 18 days of service. The court will consider the debtor's grounds for setting aside the demand and may make an order if it considers that the demand should be set aside.
   
   

4. Further legal action: If the debt is not paid and the statutory demand is not set aside, the creditor may take further legal action, including applying to the court for a winding up order or a bankruptcy petition. A winding up order is a court order that requires a company to be wound up and its assets sold to pay its creditors. A bankruptcy petition is a legal process that can result in the individual debtor being declared bankrupt.
   
   

5. Consequences of a winding up order or bankruptcy: A winding up order or bankruptcy can have serious consequences for the debtor, including the loss of assets and the impact on their credit rating. It is important to take a statutory demand seriously and seek legal advice if necessary.

It is important to note that a statutory demand is a serious matter and should not be taken lightly. You should seek legal advice if you receive a statutory demand, as there may be legal defences available or alternative options for resolving the debt.

Challenge a Statutory Demand

If you have received a statutory demand and believe that the debt is not payable or that there are grounds to have the demand set aside, there are several steps you can take to defend it:

1. Seek legal advice: It is important to seek legal advice as soon as possible, as the time limit for challenging a statutory demand is limited. A solicitor or barrister with experience in insolvency law will be able to advise you on your options and assist you in preparing your defence.

2. Check the demand: Before taking any action, it is important to check the demand carefully to ensure that it complies with the legal requirements and that the debt is legally enforceable.
   
   

3. Negotiate with the creditor: If the debt is owed, it may be possible to reach an arrangement with the creditor to repay the debt over time. This can be done without the need for legal action and may avoid the need to have the statutory demand set aside.
   
   

4. Apply to set aside the demand: If the debt is disputed or there are other grounds to have the demand set aside, you can make an application to the court to have the demand set aside. You must make this application within 18 days of the date of service of the demand.
   
   

5. Counterclaim, set-off or cross-demand: If you have a counterclaim, set-off or cross-demand that is equal to or greater than the amount of the debt, you can rely on this as a ground to have the demand set aside.
   
   

6. Insolvency proceedings: If the debt is not paid and the statutory demand is not set aside, the creditor may take further legal action, including applying to the court for a winding up order or a bankruptcy petition. If you are facing insolvency proceedings, it is important to seek legal advice as soon as possible, as there may be options available to you to avoid or delay the proceedings.

7. Propose an IVA  or CVA: An IVA or CVA can be a useful alternative to other insolvency procedures, such as bankruptcy, as it allows the individual to repay their debts in a structured manner and avoid the sale of their assets.
   
   

It is important to note that defending a statutory demand can be complex and may require a detailed understanding of the law and legal procedures. It is strongly recommended that you seek professional legal advice if you are faced with a statutory demand.