For the uninitiated, a statutory demand is an ultimatum for a certain payment from creditors to a business. Creditors often use this option to collect debts quickly, and it cannot be sent by post. Typically, the statutory demand –
- Should be either handed to the individual who owes the debt
- Must be sent to the registered office of the company or partnership
- Or it must be given to a company director, secretory or other officer
Generally speaking, a process server is arranged for delivering the statutory demand, as they can offer a report of proper service. From that date, the concerned individual/business has 21 days to repay the sum. In case the owed amount is more than £750, the creditor can choose to issue a winding up petition. For individuals who must pay a debt exceeding £5,000, creditors can submit a bankruptcy petition.
Responding to a statutory demand
In case you wish to avoid the winding up petition, there are three ways to respond to a statutory demand, says the team of Business Rescue Experts.
- Pay the debt as per the demand within 21 days
- Discuss a possible payment plan with the creditor
- Apply for an order to set the statutory demand aside
It is important to take a statutory demand serious and make the payments as per the requirements. In case you are unable to do so, talk to your creditors. The only situation where a business/individual may not respond is when they are sure that the company is insolvent and want to take the up winding up process at their end.
About setting a statutory demand aside
If one chooses to dispute a debt on the form given for statutory demand, an application must be filed within 18 days from the date of service. In such cases, there must be substantial grounds on which the statutory demand can be set aside, because the matter is in the court. If this is used as an option to delay payments, a cost order may be passed, which only increases the debt.
Grounds for which a statutory demand can be set aside include –
- The debt is disputed, either in full or part
- The debt is less than £5,000/£750 for an individual/company
- There is a strong counterclaim
- The statutory demand was prepared or served as required.
If the case goes against the company/individual, creditors can move for a winding up petition.
If you cannot set the statutory demand aside or repay the debts, there can be a choice for a voluntary arrangement.
