Statutory Demands
As we act for clients in both preparing and serving statutory demands and assisting those who have been served with one, we are well placed to advise clients on the merits of either serving a statutory demand or preparing a robust defence to one that has been received. Whatever your situation, we are here to assist both individuals and companies, so please contact one of our team of lawyers for an initial consultation.
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A statutory demand is a formal demand, set out in a prescribed form, for the repayment of an undisputed debt.
It can only be used in circumstances where the debt is undisputed and is usually presented against debtors who have failed to provide a genuine reason as to why the liability cannot be paid.
There are two types of statutory demand:
- Individual Statutory Demand
Usually served where the debt is £5,000 or more to enable the subsequent service of a bankruptcy petition.
- Company Statutory Demand
Usually served where the debt is £750 or more to enable the subsequent service of a winding up petition.
A statutory demand is a powerful tool as, failure to comply with its requirements (by neither paying the debt nor applying to have the statutory demand set aside), allows the creditor serving it to petition for the bankruptcy of an individual (if the debt is £5,000 or more) or the winding up of a company (if the debt is £750 or more).
Advantages:
- Serious consequences – the recipient of a statutory demand should take it very seriously
- Speed – there are strict time limits for the debtor to respond to a statutory demand failing which the creditor can apply for a bankruptcy petition or winding-up petition
- Amount – VAT and interest to date can be included in a statutory demand. Future interest cannot be included
- Cost effective – there are no court fees to pay when proceeding by way of a statutory demand
- Proof of service – a Process Server is usually instructed to personally serve the statutory demand on the debtor and provide a witness statement confirming such service. This avoids any dispute regarding the receipt of documents by the debtor
If the debt is genuinely disputed, the debtor can apply to set aside the statutory demand.
The creditor can either agree to set aside the statutory demand or oppose such an application.
If the creditor opposes the application and loses, there is likely to be a costs order against the creditor.
Conversely, if a debtor seeks to set aside the statutory demand and loses, costs will usually be awarded against the debtor, thereby increasing the debt owed to the creditor.
As a result, due to the likely adverse costs consequences of failure for either scenario, careful consideration and expert legal advice should be sought before:
- The creditor initially applies for a statutory demand
- The debtor applies to set aside a statutory demand, or
- The creditor opposes the debtor’s application to set aside a statutory demand
The expert lawyers at Kangs are available to assist you. We can arrange initial consultations in person, by video call or telephone.
Please contact one of our experts listed below or contact us at:
