What is a statutory demand and what should we do if we can't pay?

A statutory demand is a method of recovering a debt.  A statutory demand is usually served on an individual or a company by a solicitor acting on behalf of a creditor and is often the first step prior to the issuing of a winding up petition, in the case of a company or a bankruptcy order in the case of an individual.  As such, it must be taken seriously.  It will cost a creditor some £200-£500 to issue a demand via a solicitor so they are usually intent on recovering their money...  A statutory demand is more usually in the case of companies issued after a county court judgement has been made.  For more information on other actions please look at our creditors legal actions page.

However, the creditor needs to satisfy some requirements.

• The debt must not be in dispute.
• The debt must be more than £750.
• The debt is not subject to an arrangement or is being paid off installments under a debt relief order. (for individuals)
• The notice must be served on the company's registered address.
• The creditor must not have security over the assets of the debtor that is valued at more than the debt
• The creditor must not owe money to the debtor as otherwise there will be a case for counterclaim or set off.

What can we do to defend our company against the statutory demand?

As a statutory demand is often served after a county court judgement (CCJ) the debt is proven and it is essential that some arrangement is negotiated with the creditor if you can pay.  It is possible that to avoid a winding up petition being issued then the business should look at a CVA or company voluntary arrangement.  This will be effective in that if 75% of the creditors agree then the unsecured creditors are bound by a CVA to accept a payment of a proportion of the debt over a 3-5 year period.  BUT a winding up petition can be issued just 21 days after the service of a statutory demand.  It is therefore essential to ACT without delay.  A winding up petition once advertised can have a devastating effect on the company as the bank account is likely to be frozen.