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Statutory Demand Explained


When a company is owed £750 or more and has attempted to collect its money without success, it may resort to sending a 21-day Statutory Demand for payment. This procedure requires no court involvement, and is often used by creditors to collect debts more quickly than going to court.

You have 18 days in which to act to set aside the demand.

When an individual owes money, the amount has to be £5,000 or greater before a statutory demand is allowed.

 

The likely course of events for a limited company debt is explained below:

 

  • Statutory demand issued for non-payment of a debt by a creditor

 

  • The creditor petitions the court to wind up the company, citing non-payment of the Statutory Demand as their reason

 

  • A Winding up petition is produced and served on the company. In addition, the winding up petition is advertised in the London Gazette.

 

  • Banks check the Gazette for notice of insolvent companies, so beware, your business bank accounts will be frozen once the bank is aware of the winding up petition

 

  • Other Creditors may hear about the company’s financial position and bring their own legal action

 

  • After a period of seven days the court can issue a winding up order which sets in motion the liquidation of the company.

 

  • Following liquidation, your business will cease to trade.

 

This outcome is not inevitable but can happen very quickly. Therefore, it is important, to check the validity of the Statutory Demand served on you as soon as it is received.

Remember you only have 18 days to act, if you are to successfully set aside this demand through court process.

 

Setting aside a Statutory Demand

 This means having it cancelled by court. Numerous elements of the demand need to be checked, including the legitimacy of the specified debt – whether it is correct in full or only in part and if the required legal procedures have been followed by the sender.

Not adhering to specific rules and regulations could render the demand invalid.

There must be a genuine dispute to be able to challenge the demand.

 

What are valid reasons for reversing Statutory Demand?

You may be successful in having the demand rescinded if one or more of the following is true: 

  • The amount stated in the demand is in dispute or is less than £750
  • The creditor holds security equalling or exceeding the debt
  • You are paying by instalments and have not reneged on any payments
  • You are owed money by the creditor
  • The demand was made in error
  • The creditor failed to use the correct forms or/and required method of serving the demand.

 

The value of receiving professional help in these circumstances cannot be underestimated. Here at The Timothy James Partnership we can advise your company on the best course of action to take on receipt of a Statutory Demand.


Added: 13 Apr 2017 10:51


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Insolvency Practitioners Association
About Us


We are an independent firm of specialist Licensed Insolvency Practitioners located in Bromsgrove, Worcestershire.

At The Timothy James Partnership, we work very closely with local businesses and professionals, providing guidance on formal insolvency procedures and advice on restructuring businesses.

We recognise that at times, companies find themselves in difficult financial circumstances and our aim is to provide practical solutions in these situations.