Statutory Demand – A Guide

| January 2, 2014

law1A statutory demand can be defined as a document which is a written request from a creditor to a company for payment of debt owed to them.  Companies which receive such a document are given 18 days in which they have to negotiate a settlement with the creditor or approach a court to dismiss such demands.

Why is so important?

It is very important to ensure that this is paid within the allotted time frame.  Companies get an additional 3 days to pay the amount in full – if creditors don’t receive any response to their document, they can write to a court and petition for a winding up order on a particular business for an amount as little as £750.

Background and Process:

Any party which has been so served has 21 days to respond to creditors – to either settle the debt or work out a payment plan.  If a company can pay part of what they owe to bring it below the £750 owed, it will save them from getting shut down.  If both parties cannot agree, or the dispute is not a genuine one (given that the debt is £750 or more), the party issuing the demand can press for insolvency.

Going through the insolvency process will definitely cost more than £750 and when a company is pursued by creditors, it usually means that for low value debts this is a risky strategy.  Creditors should carefully take stock of the options available to them before deciding whether it is worth sending out a statutory demand and going through winding up proceedings on a business if they don’t get their money back.

How to serve a Statutory Demand:

It is important that the paperwork with regard to a statutory demand be served on a company based on written rules or it could be invalidated.  If it is served incorrectly, the party serving the papers will likely be held responsible to pay the debtor’s legal costs as well. As per the rules, the papers have to be delivered personally or by using a process server.  If people cannot be used to serve the papers, then it should be sent by registered mail or delivered to the mailbox directly.  Depending on method used, statement of service will be taken. Take a business debt help now!

How to challenge a statutory demand:

Statutory Demands are not a shortcut to court proceedings but some creditors use it as an alternative to waiting for unspecified periods of time to get a judgment. A statutory demand is meant to be used only to get uncontested debt.  If a creditor tries to use it to make demands without any admission of money owed or clear proof, is using a risky strategy.  Courts are likely to look askance if the amount owed in fairly low, especially considering that this is a precursor to insolvency.  Not many creditors would spend a lot of money to bankrupt companies for an amount as small as £750.

Challenging a statutory demand is fairly easy – debtors or their representatives should write as soon as they receive the paperwork.  The aim is to clarify why the demand is not proper and why it should be withdrawn.  If the creditor doesn’t agree with the debtor (depending on whether it is a company or an individual), the following steps have to be followed.  Individuals should approach a court within 18 days and apply to have it set aside.  If this is not done in a timely manner, the party which serves the paperwork can go through with the insolvency proceedings after the said 21 days. Talk to a professional expert who offers business debt help!

 

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Category: Debt, Law, Legal Problems

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