Why Has a Statutory Demand Been issued?

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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Why Has a Statutory Demand Been issued?

A Statutory Demand (known as a Stat Demand) is a debt recovery process that your creditor can use where you owe a debt, and it is above certain thresholds. It is a formal demand and is the precursor to Bankruptcy (for an individual) or Liquidation (for a company).

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

Their Statutory Demand is merely a claim they believe is due. It does not need to be supported by the likes of a County Court Judgement or any other Judgement.  Courts are starting to get tougher on claims that they see as 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.

The Process

A creditor can issue a Stat Demand against a limited company for a debt of £750 or above. For individuals, the claim must be for £5,000 or more. Creditors must pursue amounts less than these thresholds 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 a creditor is correctly dealt with.

The monetary thresholds are low in comparison to other recovery methods. The only other requirement 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, they will often supplement the Demand with all available documentation that may be ‘relevant or otherwise’. This comment is made on the basis that sometimes lots of documents are added for effect.

The following are needed to issue a Statutory Demand:

  • The completed four-page form referred to above, an 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, that anyone can issue a Stat Demand, and it does not require a solicitor.

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 or bankruptcy. 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’.

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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