What is a Statutory Demand?
What is a Statutory Demand?
A statutory demand is a formal written document used in the realm of business and finance to demand payment of a debt owed by one party to another. This demand holds legal significance as it follows a specific statutory process outlined in relevant legislation.
Typically, a statutory demand serves as a powerful tool for creditors seeking to recover outstanding debts. It is a clear and official notification to the debtor, indicating that they are obligated to settle the debt within a specified timeframe, often set at 21 days. The issuance of a statutory demand not only communicates the urgency of payment but also initiates a formal process that may lead to legal actions if the debtor fails to comply with the statutory demand.
Understanding the intricacies of statutory demands is crucial, as they often play a role in insolvency or bankruptcy proceedings. The demand not only establishes a legal obligation for the debtor to satisfy their financial liabilities but can also serve as a precursor to more severe actions if left unaddressed.
If the debtor fails to respond to the statutory demand within the stipulated time, the creditor may proceed with legal action, such as filing a winding-up petition or issuing a bankruptcy petition, depending on the nature of the debtor (individual or company).
Serving a statutory demand
To serve a statutory demand, you must deliver the demand form to the debtor by one of the following methods:
- Personal service: You can give the demand form to the debtor in person. This is the most reliable method of service, as it provides you with proof that the debtor has received the demand.
- Registered post with a certificate of posting: If you cannot serve the demand in person, you can send it to the debtor by registered post with a certificate of posting. This provides you with evidence that the demand was sent, but it does not guarantee that the debtor has received it.
- Leaving it at the debtor’s registered office: If the debtor is a company, you can leave the demand form at its registered office. This is a valid method of service, but it is important to make sure that the registered office is accurate.
- Leaving it at the debtor’s principal place of business: If the debtor is not a company or does not have a registered office, you can leave the demand form at its principal place of business. This is a valid method of service, but it is important to make sure that the principal place of business is accurate.
Once you have served the demand form, you should keep a copy of the proof of service for your records.
Can a statutory demand be challenged?
If you have received a statutory demand, you can challenge it (application to set aside the statutory demand) if you believe that the debt is not valid or if you are unable to pay the debt. You must apply to the court to have the statutory demand set aside within 18 days of receiving it. You may be able to challenge the demand after 18 days as long as the creditor has not yet filed for bankruptcy.
Additionally, in the application form, to have the demand set aside you must fill in additional information in the ‘witness statement’ section regarding your reasons to challenge and why it is later than the 18 day timeframe.
There are specific grounds on which a debtor can apply to set aside a statutory demand. Common substantial grounds include:
- Disputing the debt.
- The debt is less than the statutory minimum.
- Defects in the form or content of the demand.
- The debtor has a counterclaim, set-off, or cross-demand that equals or exceeds the amount of the debt.
To challenge a statutory demand and dispute the debt, you will need to provide the court with evidence to support your case. This evidence may include:
- Evidence that the debt is disputed. For example, you may have a contract that shows that you do not owe the money, or you may have evidence that the debt is statute-barred, meaning that it is too old to be enforced.
- Evidence that you are unable to pay the debt. This may include evidence of your income and expenses, or it may be a letter from a debt advisor confirming that you are on a debt management plan or that you are otherwise taking steps to repay your debts.
If the court is satisfied that your reasons for challenging the statutory demand are valid, it will set aside the demand. This means that the creditor will not be able to take you to court for the debt.
However, if the court is not satisfied that your reasons for challenging the statutory demand are valid, the demand will stand. This means that the creditor may be able to take you to court for the debt in full, and if you are found to be liable, you may be ordered to pay the amount of debt and any court costs.
It is important to note that challenging a statutory demand is a complex legal process. If you have applied to set aside or you are considering challenging a statutory demand, you should seek legal advice from a qualified debt advisor or solicitor.
How can Expert Commercial Law assist?
Our panel of solicitors has many years of experience in dealing with challenging a statutory demand and can assist in all aspects of debt recovery proceedings including mediation, county court proceedings and negotiation.
We understand the complexities and emotional toll that come with challenging a debt. Our panel is highly skilled and have a deep understanding of this area of law and are dedicated to providing tailored and compassionate support to each of our clients.
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