A Statutory Demand is a formal legal demand for payment. It can be served without reference to the Court or even paying a fee. When a Statutory Demand is served upon you and you owe the money, you have 21 days to pay the debt or come to an arrangement to pay, failing which, you could face a petition for bankruptcy (if an individual) or a winding up petition (if a company).
If you are an individual, a bankruptcy petition can only be presented against you if the unpaid debt amounts to £5,000 or more. If you are a company, a winding-up petition can only be presented against you if the unpaid debt amounts to £750 or more.
If you admit that the debt it owed, then you should pay the debt within 21 days. If you dispute the debt that is claim claimed, then you need to act quickly. You need to write to the person who served the Statutory Demand setting out why the debt is disputed and seeking confirmation that the Statutory Demand is withdrawn. If you are only disputing a proportion of the debt, please be mindful that a bankruptcy or winding-up petition can still be presented against you if the minimum prescribed amount is owing, namely £750 if you are a company or £5,000 if you are an individual.
In the event that you fail to obtain confirmation that the Statutory Demand is withdrawn, then it is likely that you will be required to make an application to the Court to protect your position. If you are an individual, then you have 18 days from service of the Statutory Demand to make an application to the Court to set aside the Statutory Demand. If you are a company, you have 21 days from the date of service to make an application to the Court to restrain presentation of a winding-up petition. The most common basis of this type of application is that there is a substantial dispute in relation to the debt and/or a counterclaim taking the debt to below the threshold.
The consequences of bankruptcy to an individual are very serious indeed, your non-essential assets are sold and shared out to those that you owe money to, and you could lose your home.
Likewise, the consequences of a winding up petition to your company could be catastrophic. Once the position has been made public, bank accounts will be frozen, hire purchase and finance facilities will come to a close and other claims usually follow.
If you have been served with a Statutory Demand that you don’t intend to pay, we would recommend that you seek independent legal advice.
