Receiving a Statutory DemandFebruary 7, 2012
This is a preliminary advice note and is not a substitute for taking detailed legal advice in relation to your situation, which may be legally complicated.
A statutory demand is a prescribed form which generally must be personally served. This provides for the recipient, which may be an individual or a company, with 21 days to pay (or compromise) the sum claimed to the satisfaction of the creditor, failing which the creditor will be entitled to issue an insolvency (bankruptcy or winding up) petition.
If the debt is disputed, then either an application needs to be made to the Court to set aside the statutory demand (if served upon an individual) or an injunction application needs to be made to the Court (in the case of a company) to prevent the issue of a petition.
It is not a very high hurdle to overcome in order to successfully resist a statutory demand. However, in view of the importance of the situation, legal advice should be sought as a matter of urgency.
Generally a letter to the creditor or the creditor’s solicitors setting out the legal grounds upon which the debt claimed is disputed is sufficient to secure an agreement that no petition will be presented without giving an agreed period of prior written notice. This will provide an opportunity for further information and evidence to be exchanged between the parties and hopefully which will result in the statutory demand being agreed to be withdrawn.
However if the statutory demand is not withdrawn or no such undertaking is given by the creditor or creditor’s solicitors then an application will need to be made- in the case of an individual to set aside a statutory demand or in the case of a company an injunction will have to be applied for from the Court. The legal test is in essence whether there is an arguable defence/counterclaim to the debt which will reduce the amount claimed to below the insolvency limit of £750.
Responding to statutory demands can be quite difficult. Depending upon the circumstances it is always best to instruct a solicitor with experience in dealing with this type of situation.
Insolvency represents a core area of the work of this firm.
We offer an initial fixed fee interview of half an hour at a cost of £75 plus VAT. We are pleased to undertake this by way of a telephone conference is this should be more convenient.
If you would wish this firm to assist please contact Lawrence Rodkin (partner).