How to respond to a statutory demand

Insolvency & Law is a multi-award-winning consultancy providing bespoke solutions for business owners and company directors since 2009.
Duration: 6 minutes
In this episode of the Business Advice Show, we explain how to respond to a statutory demand and why you must act swiftly if you want to protect your interests. For more info or to speak with a professional independent advisor, call 020 7504 1300...

Transcript

Hello, and welcome to Insolvency & Law’s Business Advice Show, the podcast dedicated to credit management, debt recovery, and insolvency in England and Wales.

In this episode we’ll be focusing on how to respond to a statutory demand. 

Have you received a statutory demand? If you have, don’t panic, you’ve come to the right place. This podcast summarizes the steps you can take to protect your business, and yourself, when you receive a statutory demand, either as an individual or a company director.

Ignoring a statutory demand could lead to bankruptcy, or the liquidation of your company. For guidance and advice on responding to a statutory demand, call Insolvency & Law, today on 020 7504 1300 to speak with a professional independent advisor.

What is a statutory demand and who can make them?

A statutory demand is a document that formally requests payment of an overdue debt within 21 days.

People and companies that you owe money, are known as creditors. A statutory demand is usually the first step in the process when a creditor wants to recover an overdue debt, make you bankrupt, or shut down your company

Any creditor can make a statutory demand against you for a debt that’s £5,000 or more, and less than 6 years old. The threshold is £750 for debts owed by your company. 

Responding to a statutory demand

Insolvency and Law can act on your behalf to contact your creditor or their solicitor, and seek the immediate withdrawal of a statutory demand. It may take some time to reach an agreement with your creditor, depending on how you wish to proceed, and your circumstances or those of your company.

Additionally, you may apply to the court for the statutory demand to be set aside, or have an uncooperative creditor restrained. There are 3 main remedies for dealing with a statutory demand: 

1. Pay the debt immediately
2. Make arrangements to pay all or part of the debt
3. Dispute all or part of the debt

Irrespective of the option you choose, it’s essential that you act early because time is of the essence. Failure to respond could lead to bankruptcy, or the liquidation of your company. 

Disputed Debts

There are several ways to respond to a disputed statutory demand. Firstly, you can reply in writing, within 21 days, by setting out in detail the grounds for the dispute. The creditor must oblige if you follow this up with an invitation to withdraw the statutory demand.

Furthermore, if you respond within 18 days of receiving a statutory demand, you can apply to the court to have the demand set aside and dismissed, but only if the debt is disputed, or more than 6 years old.

Court Injunctions

If a creditor refuses to withdraw a statutory demand after you have notified them of a dispute, you can apply for injunctive relief. 

If the court injunction is granted, your creditor will probably have to pay your legal expenses, which could cost between £5,000 and £15,000, or more if the injunction is unsuccessfully resisted. 

The legal grounds for defending a statutory demand can be technical. As a result, it's crucial that you seek advice from an independent insolvency specialist for practical guidance and support.

The counterclaim is another effective strategy you can use to challenge a statutory demand. You can neutralize a creditor and gain considerable leverage if your claim for direct, indirect, or consequential loss, is worth more than their claimed debt.

Sadly, we’re coming to the end of this episode. But don’t worry, if you need more information and guidance on responding to a statutory demand, call Insolvency & Law today on 0207 504 1300 and speak with a professional independent advisor.

Thanks for listening to the end of this podcast. If you found this information useful, you’ll probably enjoy some of the other shows in this series, especially the episodes on director disqualification and how to defend a misfeasance claim.

Goodbye.