A statutory demand is a formal demand for payment of a debt that is due and payable. It is made by a creditor to a debtor and it must be in writing. The debtor then has 21 days to pay the debt or make arrangements to pay it. If the debtor does not do either of these things, the creditor can apply to the court for a winding up order.
This means that the debtor’s company will be wound up and its assets will be sold in order to pay the debt. A statutory demand is a serious matter and it should not be ignored. If you receive one, you should seek legal advice as soon as possible
What is a statutory demand?
A statutory demand is a formal demand for payment of a debt that is due and payable. The demand must be in writing and served on the debtor by the creditor. If the debtor does not pay the amount demanded within 21 days, the creditor may then apply to the court for an order that the debtor pay the debt, be made bankrupt, or issue a winding up petition.
The purpose of a statutory demand is to provide a quick and efficient means of recovery for debts that are due and payable. Statutory demands can be used for both personal and corporate debts. However, there are strict rules that must be followed in order for the demand to be valid, and creditors should seek legal advice before proceeding with this course of action.
How to deal with a statutory demand
If you receive a statutory demand, it is important to take action as soon as possible. A statutory demand is a formal demand for payment of a debt that is due and payable. If you do not pay the debt or make arrangements to pay within 21 days, your creditor can apply to the court for a bankruptcy order against you.
There are a number of options available to you if you receive a statutory demand. You can:
- Pay the debt in full
- Arrange to repay the debt by instalments
- Apply to set aside the statutory demand
- Challenge the debt
If you decide to pay the debt in full, you will need to arrange this with your creditor and make sure that you have the funds available. If you are unable to pay the debt in full, you can negotiate with your creditor to agree on a repayment plan. If you are able to reach an agreement, you will need to make sure that this is set out in writing and that both parties sign it.
If your creditor does not agree to a repayment plan, you can apply to have the statutory demand set aside. This must be done within 21 days of receiving the demand.
In order to set aside a statutory demand, you need to demonstrate to the court that:
- The debt is not due and payable
- You have a genuine dispute about the debt
- You are able to repay the debt over time
- Setting aside the statutory demand would be just and equitable
In some cases, it may also be possible to challenge the whole or part of the debt that is owed. This must be done within 21 days of receiving the statutory demand.
To challenge a debt, you need to show that:
- The amount demanded is incorrect
- You have already paid part or all of the debt
- The debt is barred by statute or common law
There are other grounds on which the court can find in your favour If you receive a statutory demand, it is important to seek legal advice as soon as possible so that you can assess your options and take action accordingly.
What to do when you receive a statutory demand
If you receive a statutory demand, it is important to take action as quickly as possible. A statutory demand is a formal notice from a creditor that they are owed money. If the debt is not paid within 21 days, the creditor can apply to the court for a winding up order. This means that your company will be forced to close and you will be made bankrupt.
There are several options available to you if you receive a statutory demand. You can pay the debt in full, negotiate with the creditor to agree on a repayment plan, or challenge the demand if you believe that it is incorrect or unfair. If you do nothing, you are at risk of losing your business and your personal finances.
If you are facing financial difficulties, it is important to seek professional advice as soon as possible. There are many options available to help you manage your debt and avoid bankruptcy or being wound up if you are a limited company. Statutory demands should be taken seriously and dealt with quickly to protect your business and your personal finances.
Read more: Difference between a statutory demand and a winding up petition
Professional assistance with statutory demands
If you have been served with a statutory demand there are a number of formal insolvency procedures that can be used, such as company administration. These can protect your business from any existing or planned legal action. One option is a Company Voluntary Arrangement (CVA). This provides more time to repay some of the overall debt at a rate affordable for the business.
However, before making a decision about whether or not to proceed with a statutory demand, it’s important to seek professional advice. An insolvency solicitor can help you assess your financial situation and advise you on your options. They can also negotiate with your creditors on your behalf and help you prepare for any court proceedings. If you’re facing financial difficulties, don’t hesitate to seek out professional assistance.
Conclusion
If a company has been issued with a statutory demand, it is important to act quickly and seek legal advice. The demand is a formal notice that a creditor believes the company is unable to pay a debt, and failure to respond or repay the debt within 21 days can result in the creditor applying to wind up the company.
The company should review the demand to ensure it is valid and that the debt claimed is accurate and undisputed. If the debt is disputed, the company should consider challenging the demand. If the debt is valid, the company should consider negotiating with the creditor to reach a repayment plan.
It is also important to seek professional advice from a lawyer, accountant or insolvency practitioner to review the company’s financial situation and determine the best course of action.
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.