The Do’s and Don’ts of Statutory Demands
This article is intended to give you some idea of what is involved with the serious issues facing you and your company if you receive a Statutory Demand. The first thing to say that if you are served with a demand you need to act quickly, delay can only make the situation worse.
• Statutory demands are often served by personal service as the creditor needs to prove that it has been received by the Company.
• Winding up can result if a statutory demand is not satisfied within 21 days or if it is not set aside by the court following and application made by you within 18 days.
• The threshold is only £750.
• If you have not applied for an injunction restraining the creditor from presenting a winding up petition then an unsatisfied demand could result in the Winding up of the company.
Dealing with a Statutory Demand
• First, to repeat, if you receive a statutory demand don’t ignore it!
• If you dispute the debt or if you have a counterclaim or setoff for the amount demanded then contact the creditor setting out this information and ask them to withdraw it.
• In any case Creditors frequently use statutory demands as a debt recovery tool to obtain payment.
• Creditors will often not want to proceed further down this line because the costs involved can be very high with no certainty of success if bankruptcy or winding up occurs.
If the Creditor will not agree to withdraw the Demand
• Apply to the Court within 18 days to have the Demand set aside setting out clearly the reasons why.
• You can apply for an injunction to prevent the creditor presenting the Winding up Petition.
• With an application for an injunction, the Court will consider, amongst other things whether;
o There is a genuine dispute about the sum demanded and/or
o There is a counter claim or set off, whether the creditor has another way to recover the money
o It would be oppressive or unfair for the company to wound up.
A note of warning!
• The legal fees for an injunction application can be significant.
• If you are successful the Court will order the creditor to pay these costs
• However until these are paid you will have to fund these costs which, given the circumstances may be difficult.
• It may be possible for the debtor to find a solicitor who will act for them on a no-win no-fee agreement subject to certain conditions.
Another note of Warning!
Looking at this subject from the other side of the fence,
• Unless the debt is undisputed any creditor who serves a Statutory Demand takes a big risk on costs if they do not withdraw it when the debtor has raised a defence.
• Statutory Demands are not supposed to be used as a debt collection tool so, remember that if a creditor persists with a Demand and the Company is able to have the Demand set aside or obtains an injunction against the presentation of a Winding up Petition then the Court is likely to impose costs on the creditor even if they subsequently win the dispute/counterclaim in normal proceedings.
Finally as you will have understood from this article, this is a complicated subject and since your Company’s survival is on the line we strongly recommend that on the receipt of a Statutory Demand you seek expert advice.
DISCLAIMER This blog / article is for information and interest only. It is not a substitute for full professional advice, which will take account of the specific and individual circumstances surrounding your matter. Navigate Business Recovery Limited cannot accept any responsibility for any loss arising as a result of any person or organisation acting or refraining from acting on any information.
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