'A statutory demand is a highly potent means of recovering payment
of outstanding debts and can be considered as an alternative to issuing
proceedings.'
If a debt is not paid in full within 21 days of
the statutory demand being personally served, the debtor is made aware that a
winding up petition (in the case of a company) or a bankruptcy petition (in the
case of an individual) could be served. If the debtor is a limited company,
failure to comply with a statutory demand is an act of insolvency and if the
company continues to trade without paying the debt, the directors risk personal
liabilities for the company’s debts.
Statutory demands can be used to attempt to
recover debts from individuals, partnerships and companies, provided that the
debt exceeds £750. They can be issued even if a County or High Court Judgment
has not been obtained.
The process is simple. Firstly, a statutory
demand is drafted confirming the amount owed, the interest and the date the debt
became payable. The demand is then served upon the debtor by a personal service
agent. The debtor has 21 days in which to pay the debt, failing which they can
then be pursued further by issuing a winding-up or bankruptcy petition.
However, statutory demands should not be used if
the debtor is disputing the debt. The reason being that the debtor has 18 days
from service of the statutory demand to make an application to have it set
aside. If the debtor’s application is successful this could result in a costs
order against the other party and valuable time and expense would have been
wasted. In such circumstances a more appropriate course of action would be to
issue Court proceedings and a statutory demand can be used to enforce the
Judgment providing it’s successful. It is therefore important that legal advice
is sought before further action is taken in order to explore all options and the
merits of the case.
For advice or further information on other
commercial services email commerciallaw@fjg.co.uk or telephone
the commercial team on 01206 835230.
Contact us about statutory demands
For further information please contact Tony
Fisher, James Burkett or Katy Fordham on 01206 835300 or email
Debtrecovery@fjg.co.uk
Our offices are based on the Business Park in Colchester Essex and have free
client parking and easy access from the A12/A14.