A statutory demand is a prelude to insolvency proceedings against a debtor for a debt of over £750.00. If you are considering using a statutory demand, we provide a cost effective service for preparation but we can also advise on overall strategy and risks and rewards of pursuing a debtor via statutory demand or generally. With any dispute or debt, strategy is paramount.
A party served with a statutory demand has 21 days to respond which would usually be to either settle the debt (either in full or by way of a payment plan), reduce the debt to below £750 or raise a dispute (see below).
If an agreement cannot be reached or if the dispute is not bona fide (genuine), provided that the outstanding debt is £750 or more, the party that has served the statutory demand can move towards insolvency proceedings.
Insolvency proceedings will cost more than £750.00 to commence and pursue by a creditor which means :-
Statutory Demand Forms
There are three types of statutory demand forms depending upon the nature of the debt:
Serving a Statutory Demand
It is important that a statutory demand is served in accordance with the rules otherwise it could be deemed invalid and the party that has served the demand could be held liable to pay the debtors legal costs.
The general rule is that the statutory demand should either be personally delivered to the debtor or by process server. If the statutory demand cannot be personally delivered it should be sent by registered post or put through the debtor’s letterbox.
Depending on the method of service, a witness statement of service will also be required.
Challenging a Statutory Demand
A statutory demand is not supposed to be a shortcut to court proceedings but in some cases creditors do use a demand as an alternative to waiting possibly months to obtain a court judgment. As statutory demands are designed to be used only for uncontested debts, a creditor that uses a demand without a formal admission of indebtedness, a court judgment or very clear proof of the debt is taking a risk. A court is likely to be suspicious also if the debt is relatively low, bearing in mind the demand is a prelude to insolvency and few creditors would realistically spend the money to make someone bankrupt or wind up a company for a debt of only £750.00 or not much more.
The method of challenging a statutory is for the debtor or his, her or their representatives to write to the creditor as soon as the demand is received (bearing in mind the short deadline to comply or apply to set aside the demand) explaining why the statutory demand is improper or the debt is contested and asking them to withdraw it. Should the creditor not accept the debtor’s argument then depending on whether the debtor is an individual or company, they should take the steps outlined below.
An individual who wishes to challenge a statutory demand should apply to the court within 18 days of being served with the demand (longer if they were abroad at the time of being served) to have it “set aside”.
Please note failure to apply to the court in time to either have the statutory demand set aside or to apply for an injunction will leave the party that served the statutory demand free to move towards insolvency proceedings after 21 days from the date of service has elapsed.