Pre-insolvency advice Statutory Demands – Do Not Ignore Them

At Bell & Company, we are here to help you manage that gap, so if you have overstretched your capacity and have been served with a Statutory Demand, call us now for impartial advice and to discuss the best options available to you.

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Statutory Demands – Do Not Ignore Them

A Statutory Demand (also referred to as a Stat Demand) is a debt recovery process that can be used where a debt is owed, and it is above certain thresholds. It is a formal demand and is the precursor to full action to seek the Bankruptcy of an individual or the Liquidation of a company.

The claimant/creditor does not have to consider any contentious issues involved such as a counterclaim and/or any form of set off against the amount they believe it is due. It’s their perception of what is due.

Their Statutory Demand is merely a claim they believe is due and does not need to be supported by any other judgement e.g. a County Court Judgement. Courts are starting to get tougher on claims that they see as frivolous and/or abusing Court processes and wasting Court time.

However, overall this means that Statutory Demands still remain an effective and relatively easy to use method for recovering debts.

Who can Issue a Statutory Demand?

A Stat Demand can be issued against a limited company for a debt of £750+ or for individuals the claim must be for £5,000+. Any amounts for less than these thresholds typically must be pursued through the County Court, for example.

This is what makes Stat Demands such a blunt but effective tool when trying to ensure that a claim made by creditor is correctly dealt with.

The monetary thresholds, are low and the only other requirement is to Serve what is essentially a four-page document that does not have to be overly detailed. Overall, the process for issuing a Statutory Demand is relatively simple and easy.

If solicitors are involved in filing a Statutory Demand, then very often they will supplement the Demand with all available documentation that that may be ‘relevant or otherwise’. This comment is made on the basis that sometimes that lots of documents are added for effect.

The following are needed to issue a Statutory Demand:

  • The completed four-page form referred to above, a SD1 for a company and an SD2 for an individual. The cost is typically around £1,000 pounds if a solicitor deals with the matter and prepares the Statutory Demand
  • It needs to be served correctly and the cost for a Process Server is typically £250

It should be noted, anyone can issue a Stat Demand and there is not necessarily the requirement to involve solicitors

Within the Forms SD1 and SD2 that need to be completed, there is a full explanation of the process, for the recipient. If the requirements for a Stat Demand are not met, it could be too late to prevent liquidation for a limited company or bankruptcy for an individual. You have 18 days from service to apply to set aside a statutory demand or 21 days to pay the debt.

 “Why Have I Received a Statutory Demand?”

So, this quite basic approach to recovering debt is usually very effective and is the start of one of the following scenarios typically:

  • A Statutory Demand can be an approach that helps start conversations between a creditor and the person or company who owes the money
  • If ignored it can strengthen the opposition’s position. It allows them to threaten the Debtor that they issue a Bankruptcy petition or winding up petition.
  • They are genuinely seeking you or your business’ insolvency, for whatever reason

IMPORTANT TO NOTE: If either a company or individual receives a Bankruptcy or Winding Up Petition, the Petitions become formal Court Documents publicly available for all to see.

Consequently, all financial institutions, your Banks and other lenders will be put on notice that that is the position and could be ‘frozen’.

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