How to Issue a Statutory Demand

How to Issue a Statutory Demand

What is a statutory demand?

A statutory demand is a formal written demand for payment of a debt owed by a debtor to a creditor. It is a formal legal document and typically gives the debtor a specified period of time (usually 21 days) to pay the debt or come to a satisfactory arrangement to settle it. Statutory demands can be served on individual debtors and company debtors alike.

If the debtor fails to comply with the demand within the specified time frame, the creditor may take further legal action to recover the debt, which could include initiating bankruptcy proceedings or winding up proceedings against the debtor, depending on whether the debtor is an individual or a company.

Our team of experienced commercial solicitors at South Bank Legal can offer personalised legal advice to our clients, including advice on how to issue a statutory demand. If you would like more information on our services, please do not hesitate to get in touch with us today.

 

How to Issue a statutory demand

 

Issuing a statutory demand is a specific procedure referenced in the Insolvency Act 1986. Outlined below are the general steps involved:

  • Ensure eligibility: Before issuing a statutory demand, ensure that the debt is owed and is not genuinely disputed by the debtor. The debt owed by the debtor must be at least £750 or more where the debtor is a company, or £5,000 or more where the debtor is an individual. The debt must be a liquidated sum, meaning it is a definite and fixed amount that can be precisely determined. This excludes contingent or unliquidated debts.
  • Prepare demand: Draft a formal statutory demand document. This document should include details such as the amount owed, the basis of the debt, and any relevant payment terms or deadlines.
  • Serve the demand: Serve the statutory demand on the debtor in accordance with the rules set out in the Insolvency Rules 2016. Service on the debtor should be effected in person (where the debtor is an individual) or leaving it at the debtor’s registered office or other place of business (where the debtor is a company).
  • Statement of service: After serving the statutory demand, the person serving it (usually a process server) should provide a statement of service, confirming how and when the demand was served.
  • Allow time for response: The debtor has 21 days from the date of service of the statutory demand to pay the debt. Alternatively an individual debtor can dispute the statutory demand by applying to set aside the demand and a company debtor can apply for an injunction to prevent the presentation of a winding up petition based on the demand.
  • Take further action if necessary: If the debtor fails to comply with the demand within the specified time frame, you may proceed with further legal action in respect of  the debt. This could involve issuing a bankruptcy petition (if they are an individual) or presenting a winding up petition (if they are a corporate entity/limited company).

It’s important to note that issuing a statutory demand is a serious step, and can be serious legal consequences for both the creditor and the debtor, depending on whether the demand is a valid one or not.

 

Costs involved in issuing a statutory demand

 

Issuing a statutory demand involves various costs, and these can include:

Solicitor fees: If you choose to seek legal advice or assistance in preparing and issuing the statutory demand, you will incur legal fees.

Process server fees: Serving the statutory demand on the debtor requires the services of a process server. Fees for process servers vary, and they may charge based on factors such as location and urgency.

Legal Representation Costs (if applicable): If legal representation is required during any subsequent legal proceedings resulting from the statutory demand, such as responding to challenges or pursuing further insolvency actions, additional legal fees may be incurred.

 

Can you challenge a statutory demand?

 

If you receive a statutory demand as an individual and believe the debt is not owed, you can challenge it by applying to set aside the statutory demand. Companies challenging a demand must seek a court injunction, as there is no formal procedure in the Insolvency Rules for setting aside a statutory demand served on a company.

Individuals must apply to the court to have the statutory demand set aside within 18 days of the demand being served.

Grounds for challenge include the debt being disputed, the amount of debt being below the statutory minimum, defects in the demand, or having a counterclaim equalling or exceeding the debt.

 

How can South Bank Legal assist?

 

Our team of commercial solicitors at South Bank Legal are highly experienced in cases involving issuing statutory demands, as well as having them set aside.

Our solicitors can provide specialist legal services on a wide range of commercial disputes issues. These include intellectual property disputes, multi-million pound shareholder disputes, commercial contract disputes and property disputes.

If you would like more legal advice on how to issue a statutory demand or wish to discuss any of our services, you can contact using the form below or telephone 02035765179 for a confidential discussion with one of our solicitors.

 

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