A statutory demand is a written and formal demand made by a creditor for the repayment of debt. Service of a statutory demand is one of two ways a creditor can establish grounds to issue a winding up petition.

Statutory demands are often served on companies that owe money to creditors who have already made repeated and unsuccessful attempts to recover the debt. The statutory demand formalises the debt collection process by stating that if the debt is not paid or a suitable agreement cannot be reached, court proceedings to close the company down can begin.

Once a valid statutory demand has been served on business, it has 21 days to pay the debt or 18 days to dispute the debt and ask for it to be set aside by the court. If neither of these actions is taken, the creditor can then escalate the situation by issuing a winding up petition against the company. Ultimately, this could lead to the liquidation of the debtor company.  

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Do you Have to Serve a Statutory Demand Before a Winding up Petition?

Strictyly speaking the answer is no if you already have a court judgment. If you don’t have a court judgment then a statutory demand is a mandatory prequisite to a winding up petiition. The underlying need, either via the statutory demand or court judgment route, is to demonstrate at the time of issuing a winding up petition that the debtor company owes the creditor an undisputed debt of over £750.00.

If a winding up petition is issued for a debt that is disputed, the court will simply dismiss the petition and could award costs against the creditor.

If you’d like to discuss any of the issues in the article or talk to someone about issuing or defending a winding up petition, please call 0800 074 6757 or email: info@companydebt.com today.