A statutory demand is sometimes used as a key part of a serious debt claim against a company, or individual. Any legal court judgement can be used as evidence of insolvency and this means that a creditor may be able to pursue a bankruptcy petition against the individual in question, or a winding up petition for a company.
Legal action should not be ignored and a statutory demand provides a specific and clear tool for any creditor with very serious intentions against a company. Here are some commonly-asked statutory demand questions and answers, which may be of use:
What is the Process?
The minimum amount for a statutory demand debt must be at least £750 or more.
Once served, it will show the contact details of the person to contact if the debt is to be paid or the person to contact if you dispute the debt in the first instance. Where a company contests the ‘demand’ the company and or solicitor should contact the court denoted on the demand and an injunction should be made to stop the statutory demand.
Once 21 days have passed from the date of the statutory demand the amount claimed should be paid in full or within 18 days of the date the debt should be settled or contested.
Failure to pay the full amount or agree a settlement of some kind before the end of the 21 days will mean the creditor can wind your company up or make you bankrupt if a sole trader.
The failure to pay the debt is significant as it is evidence that the company is indeed insolvent as it cannot pay its bills when due. This means the company can be legally wound up and forced into compulsory liquidation.
Can I ignore a Statutory Demand?
No. You should never ignore a statutory demand as from an insolvency legal viewpoint the non-payment of a statutory demand is evidence of the limited company, or individual’s inability to pay the debt. Once the 21 days have passed the company can be wound up and the individual can be made bankrupt.
“I Just Received a Company Demand in the post is this legal?”
Yes if it is a company ‘demand’ there are slightly different rules for individuals. A statutory demand is usually ‘served’ and this can be as simple sending by registered post as someone will have had to ‘sign’ for the statutory demand. It can also be ‘served’ legally if it is handed to a manager, company secretary or director. If a demand is posted to anything other than the registered office and there is no evidence of being ‘served’ then you may have grounds to object to the original statutory demand, but of course the creditor may simply issue another demand.
It is also not unusual to have a professional ‘process server’ serve the ‘demand’ to be absolutely sure of evidence of delivery.
The creditor will need to demonstrate some evidence of the statutory demand being served correctly if they petition the court for a winding up.
“Does it make any difference if I am a limited company and am served with an individual version?”
Yes, it does and this is likely to invalidate the demand if you are a company, the correct form is 4.1 (6.1, 6.2 and 6.3 are intended for sole traders, or individuals).
Must a creditor always use a Statutory Demand to claim a debt?
No. A creditor could have already proven the debt in law by having a claim proved in court such as a county court judgement or other court order. The creditor could simply ask the judge to enforce the original debt order. As long as the creditor is owed more than £750 the company can be wound up and forced into a compulsory liquidation.
The amount claimed is wrong, does this matter?
No a court will not set aside a statutory demand simply because the amount is wrong.
When does a Statutory Demand expire?
There is no actual lifespan in law but it is generally accepted that if the demand has not been enacted after 4 months then a judge may question why not.
In general terms under the Limitation Act 1980 means a debt has a shelf life in law of 6 years.
I have not acknowledged receipt, does this invalidate the process?
No, a creditor can obtain a statement verifying for example that the statutory demand was delivered to you or posted through the door of your registered office.
How do I ‘set aside’ a Statutory Demand?
There is no specific law for setting aside a company statutory demand but they are allowed to contest the debt the same as any individual. You will need to prove it is a genuine dispute and not a delaying tactic and you are likely to need a lawyer to have the statutory demand set aside.
In principle if the company is successful in having the statutory demand set aside then the creditor will have to pay the court fees. Alternatively if the company fails to have the ‘demand’ set aside then the company will pay the courts costs.
If you have received a Statutory Demand against your company please contact us to find out what can be done about it on 08000 746 757; email us at firstname.lastname@example.org; use the Live Support at the bottom of the page.