Statutory Demands: Consequences and Options

If you or your business owe a creditor money, they could issue a statutory demand. This is the first step to making you bankrupt or winding up your business....more

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Statutory Demands: Consequences and Options

We always implore those in receipt of this precursor to Bankruptcy/Liquidation to take immediate action. As with all issues arising from debt problems, the most important thing to do is act and attack the issue head-on. When it comes to statutory demands, procrastination cannot be an option.

The approach taken by a Creditor to seek recovery of a debt via a Statutory Demand can be quick when compared with other more formal routes of legal debt recovery which in the main, take the form of:

  • County Court Summons.
  • High Court Writs.

These two processes can take a considerable amount of time in Court to reach the decision/Judgement sought. Thus, the attraction to Creditors in issuing a Statutory Demand – it cuts through a lot of ‘red tape’.

The entry level for issuing a Statutory Demand is relatively low in terms of:

  1. Paperwork and administration.
  2. Proof of debt.
  3. Cost, when compared alternative recovery methods.

Another issue to consider when subject to a Statutory Demand is ‘who has carriage of the case’.

If the Creditor in question is trying to make sure your indebtedness to them is seriously dealt with by issuing the Stat Demand themselves, yes, it is a threat. However, very often, it is imploring you to talk or they will seek your financial demise.

Consequences of a Statutory Demand

You have 18 or 21 days to respond to a Statutory Demand, depending on whether you want to pay it  or, dispute it. If you do not respond, the consequences are relatively simple.

For Individuals

After 21 days has passed, the creditor can apply to the courts to make you Bankrupt, via a Bankruptcy Petition. If this is successful, which it likely will be, a Trustee will repossess your assets and sell them to pay your creditor(s). This means your home, savings and income are all at risk. It also has various impacts on your personal finances and credit score. Overall, it is not a favourable option.

For Businesses

The process is broadly similar for businesses, your creditor will likely issue a Winding-up petition, this is the next step to forcing your business into liquidation.

If this happens, a liquidator will close your business and sell the assets. The proceeds are used to pay your creditor(s) and the liquidator. It is a costly option and will see your conduct as a director heavily scrutinised. This is a particular issue if you have acted irresponsibly in your role as a director.

Options if Your Receive a Statutory Demand

In essence, you can either fight it, or pay it. Either way, the key is getting the right commercial advice and then developing the right strategy to deal with this problem.

Even in such instances of a Creditor issuing the Statutory Demand themselves, it is still important to adhere to processes that protect you in the event of any breakdown in negotiations/discussions.

If the Statutory Demand is prepared and served through solicitors – it’s a different situation on three accounts:

  1. You need advice and will require some form of legal representation. We at Bell & Company provide those served with a Statutory Demand with definitive commercial advice and strategic approaches needed, after considering the recipient’s complete financial position.
  2. You will require legal representation if you attempt to Defend a Statutory Demand. This sees a Court Process start and in simple terms any Court Reference applied to case requires legal representation.
  3. If the issuing solicitor has carriage of the case, it can become about them. Without slighting our legal friends sometimes, they have only one tactic to follow and miss the commerciality of the situation and others may see it as a fee charging opportunity.

The process of defending a Statutory Demand is a pain but must be considered not just in legal terms and this is again where we at Bell & Company excel.

Points to consider when defending a Statutory Demand include:

  • Contesting the amount claimed, but the actual amount owed is still above the required thresholds of £750 for a company and £5,000 for an individual – including unincorporated businesses.
  • Defence preparation.
  • Appointment of solicitors and Counsel, which is expensive and usually involves large upfront fees.
  • The time needed.
  • Court attendance.
  • In the event you are not successful – what next?

If you have been served with a Statutory Demand or have missed the 18–21 day deadline, contact our specialist team at Bell & Company today. Our team will offer expert financial and legal advice to help you find the best possible outcome. Call us on 0330 159 5820 or email us at [email protected]

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