In brief, a statutory demand is a requirement made by a creditor for payment of an overdue debt against either a company or an individual. In order for a demand of this type to be made, the debt must exceed £750 if owed by a company or £5,000 if by an individual. The demand itself comes with a warning of further action if the debt is not settled within 21 days from its issue date.
Who can issue a Statutory Demand?
Any individual that is owed money (a creditor) can issue a statutory demand. You will need:
- A clear invoice referring to the bill for the debt owed;
- The date by which the payment was due;
- The time in which the debt now needs to be paid (this is often an offer of 21 days from issue).
If you are unsure about whether you can issue a Statutory Demand, then get in touch with us to discuss your options and what the best route for debt recovery would be for you.
What happens if you receive a Statutory Demand?
You have several options if you receive a statutory demand but, ignoring it is not one of them. If you ignore it, there is a significant chance that the next piece of correspondence received will be a bankruptcy order or a winding-up petition. At that stage you will face, potentially insurmountable, problems and could encounter bankruptcy or company liquidation.
After receiving a Statutory Demand, you should:
- Act quickly, and don’t ignore any demands.
- Pay the debt if you can, or create some form of arrangement with the creditor to pay the debt off in installments.
- Contact an Insolvency Practitioner immediately if you cannot pay, or if your company is insolvent.
You should not:
- Refuse to pay your debt.
- Ignore the Statutory Demand.
- Discuss any matters other than straightforward repayment without a licenced Insolvency Practitioners’ input.
How to set aside a Statutory Demand?
Should you receive a Statutory Demand for a debt that is either:
- Genuinely subject to dispute or;
- For an amount less than the de-minimis levels
…then you can apply to have it “set aside” as long as this is done within 18 days of its date. This means that the courts can cancel the Statutory Demand should there be legitimate reasons to suggest that this course of action is correct.
The overriding principle is that if you cannot pay the debt in full within the 21-day time limit and there are no disputes then, whilst it may be prudent to first of all try to negotiate a payment plan with the creditor, this should be done immediately and must be resolved within the 21 day period or you are at risk.
What happens after a Statutory Demand is issued?
If the debt is repaid, or a repayment plan is agreed upon between creditor and debtor, then there should be no further action taken. Should there be any issues with repayment, a creditor can petition for a winding-up order to be served against a company or a bankruptcy order against an individual.
These petitions are applied for through the courts and can force your company into specific formal insolvency proceedings. If the Statutory Demand is believed to be unjust or incorrect in any way, this can be set aside and cancelled or adapted to reflect the true debt amount.
Contact The Insolvency Experts
If you are not able to reach a suitable compromise in regards to your Statutory Demand, then it is imperative that you seek further assistance. The Insolvency Experts can offer you advice and support for dealing with statutory demands. You can contact us through our online form or call us directly on 0120 420 8151.