Statutory Demand

If all attempts to get your debtor to engage in correspondence have failed, consider serving them with a statutory demand.

If you issue a statutory demand, it can be followed up after 21 days with a winding up petition (putting the company into compulsory liquidation). The potential of losing financial control to a court appointed officer could really concentrate your debtor’s mind, especially with the petition affecting their borrowing power and other financial agreements.

Make sure you research the financial viability of the company. If the debtor is already insolvent it’s probably not worth wasting your money on issuing the petition.

Set-Aside

The procedure for issuing a statutory demand is set out in the Insolvency Act 1986. The procedure isn’t complicated but must be followed carefully, otherwise, the statutory demand may be deemed void and the debtor can apply for the statutory demand to be set aside by applying to the county court.

An application to set aside a statutory demand can be made if:

  • There is a substantial dispute about the money owed
  • There is a counterclaim of more than the money owed
  • You hold security that equals or exceeds the debt owed
  • The debt is for less than £750
  • Enforcement has been stayed by the county court
  • The debt is being repaid by instalments

The debtor must apply for a set aside within 18 days of being served with the demand. If the application is deemed groundless it can be dismissed without the requirement of a hearing. If there are grounds the application will be listed for a hearing before a District Judge.

Mercian Law will ensure the statutory demand is compliant with the Insolvency Act 1986.

We have the following conditions before accepting instructions:

  • The debt must be for over £750. However, you would probably only consider petitioning for bankruptcy or winding up if the debt is for over £5000. Otherwise, your fees could be more than the debt you are pursuing
  • The debt is for a definite amount and cannot be disputed
  • The debtor is solvent