A statutory demand is a written and formal demand made by a creditor for the repayment of debt.
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.
How to the two differ?
No. A statutory demand is usually the first step a creditor will take to let a debtor company know it is serious about recovering a debt and is prepared to take legal action. A statutory demand is often issued with the intention to go on to present a winding up petition if the debt is not paid. If the statutory demand is not paid or challenged, the creditor will then have the necessary authority to go on to issue the petition.
Does that mean a Statutory Demand has to be Issued Before a WUP?
No, but the statutory demand does serve an important purpose. If the statutory demand goes unchallenged, it demonstrates that an undisputed debt is outstanding, and this is criteria that must be satisfied for a winding up petition to be issued. 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.
But while the statutory demand does serve an important purpose, there are other ways to go about issuing a winding up petition. If a creditor has already obtained a county court judgement (CCJ) against a company for an unpaid debt, they could then go straight to issuing a winding up petition without first serving a statutory demand. That is because the CCJ proves the existence of the undisputed debt.
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 08000 746 757 or email: [email protected] today.