A Statutory Demand is the designated form produced under the provisions of the Insolvency Legislation and Rules for formally demanding repayment of a debt of over £750.00 against a limited company or £5,000.00 against an individual.

Following the implementation of The Insolvency Act 1986 (Amendment ) Order 2015, with effect from the 1st October 2015, Section 267(4) of the Insolvency Act 1986 provides that the bankruptcy limit was increased from £750.00 to £5,000.00.   

The demand acts as a prelude to either a company being served with a Winding Up Petition or an individual being served with a Bankruptcy Petition.

Following receipt of a Statutory Demand, a debtor has 21 days to pay the debt, or in the case of an individual, 18 days to apply to set it aside. Failure to comply with a demand provides the creditor with authority to issue proceedings without further notice to the debtor.

The Insolvency Rules imply that the insolvency process is to be used for uncontested debts.  With this in mind it is always advisable to first obtain a Judgment or Order of the court providing for payment of what’s owed.

If a debt is genuinely disputed, use of a Statutory Demand is inappropriate and bankruptcy is not the correct forum for dispute resolution.  Similarly serving a statutory demand on an individual for a debt less than £5,000 is likely to be treated as an abuse of process ultimately leading to the demand being set aside upon challenge.  This could prove costly for a creditor as the Court on setting aside will usually make a costs order in favour of the debtor.

Any application issued to set aside a statutory demand will need to be responded to promptly. We can assist in opposing the application by preparing, with you, evidence in opposition as well as attending on the hearing itself.

It is important that as a creditor you understand the risks associated with losing the application itself.  The sanction imposed by the court normally involves an adverse costs order.

Whether you are a creditor considering how best to pursue a sizeable debt or a debtor who has been served with a Statutory Demand and you need advice or want to contest the debt, get in touch for expert assistance.