Challenging or defending a statutory demand can be a complex process and it is important to seek legal advice. One way to challenge a statutory demand is to argue that the debt is disputed, meaning the company does not believe it owes the money. In this case, the company can file a Court application to set aside the demand.
Another way to challenge a statutory demand is to argue that the company is able to pay the debt, but needs more time. The company can file a Court application to extend the time to respond to the demand.
The company can also defend the statutory demand by providing evidence that it has a genuine counterclaim, set-off or cross-demand against the creditor.
It is also important to note that a company can only challenge or defend a statutory demand if it has a genuine dispute and not just because it is unable to pay the debt
How to apply to have a statutory demand set aside
If a company believes that a statutory demand is incorrect or invalid, it may apply to have the demand set aside by the court. Here are a few key points to consider when making such an application:
- The company should seek legal advice and file the application as soon as possible, as there is a strict 21-day time limit for responding to a statutory demand.
- The company should provide evidence to support its claim that the demand is incorrect or invalid.
- The company should also provide evidence of its financial position and any genuine dispute it has with the creditor.
- The company should provide evidence of its counterclaim, set-off or cross-demand.
- The company should be able to demonstrate that it has a real prospect of success and that the demand is oppressive or unjust.
It is important to note that the court may require the company to pay a deposit or security for costs to be able to file the application.
If it’s been more than 18 days since you got the demand
If it has been more than 18 days since a company has received a statutory demand, it may be more difficult to have the demand set aside by the court. This is because the court is less likely to set aside a demand that has not been challenged within the 21-day time limit.
However, it is still possible to apply to have the demand set aside, but the company will need to provide a compelling reason for the delay and evidence of its financial position and any genuine dispute it has with the creditor. The company should also provide evidence of its counterclaim, set-off or cross-demand.
As long as your creditor hasn’t officially filed for bankruptcy or a winding up petition, you may still ask to have the demand put aside.
You must include more details in the “witness statement” section of the application form. You should state your reasoning for why you believe the demand should be rejected in this section of the form.
- You should detail the following in the witness statement:
- why are you applying over 18 days after receiving the demand?
- that your debtor has not yet submitted a bankruptcy petition
Attend the hearing
A date will be set for the hearing of an application to have a statutory demand set aside, and it is very important that the company or individual attends the hearing. If the company does not attend the hearing, the court will likely dismiss the application and the statutory demand will remain in effect. This means that the creditor may proceed with winding up the company if the debt is not paid within 21 days of the demand.
It is important to prepare well in advance for the hearing, to ensure that the company has the best chance of success. This includes gathering and organising all relevant evidence, such as financial statements and any other documents that support the company’s claim that the demand is incorrect or invalid. The company should also be prepared to answer any questions the court may have and to provide a clear and compelling argument for why the demand should be set aside.
If the application is denied, your creditor may file an application to declare bankruptcy right away. If you need additional time to settle the debt or seek guidance, you can petition the court to postpone this. Without evidence of a speedy payment plan, the court is likely to reject your request. For instance, you’ll need to demonstrate that you have a buyer and let them know when the property is anticipated to sell if you’re selling it to earn money to pay the debt.
If your application is denied, you can be required to pay court fees
If your request is granted, the statutory demand will be revoked or overturned. However, depending on the reason it was set aside, you could still need to negotiate the debt with your creditor, or else they might try to declare you bankrupt again in the future.
Read more: Statutory demand vs winding up petition
Conclusion
A corporation that thinks a statutory requirement is improper or invalid should take the crucial step of challenging it. If a corporation doesn’t react to a statutory demand or repay the debt within 21 days, the creditor may file a petition to dissolve the business, which could have serious financial repercussions. The corporation can safeguard its interests and even escape the winding-up procedure by contesting the claim.
When a statutory demand is received, it is crucial to take immediate action and get legal counsel from a lawyer or other expert to assess the company’s financial status and choose the best course of action. This could entail asking for the demand to be dropped, establishing a payment arrangement with the creditor, or requesting a debt settlement.
If you have received a statutory demand and require advice on what to do next complete the online enquiry form.
With over three decades of experience in the business and turnaround sector, Steve Jones is one of the founders of Business Insolvency Helpline. With specialist knowledge of Insolvency, Liquidations, Administration, Pre-packs, CVA, MVL, Restructuring Advice and Company investment.