If you are owed money by an individual or limited company, a statutory demand is a powerful debt recovery tool. It is a formal written demand requiring payment of a debt and can be used where the debt exists, is due and is not in dispute.

At Clough & Willis, our statutory demand solicitors help creditors decide whether serving a statutory demand is the right step for recovering the money owed. We can review the debt, the evidence available and the debtor’s circumstances before preparing the correct form, arranging proper service and advising on the most appropriate next steps if the debtor fails to pay, disputes the debt or ignores the demand.

Serving statutory demands is a serious legal step. If the demand is prepared incorrectly, served improperly or used in the wrong circumstances, the debtor may challenge it, apply to set aside the statutory demand or seek legal costs. For these reasons, we strongly advise you to seek legal advice before taking action.

Our solicitors will apply their extensive experience in statutory demand and debt recovery matters to the specific circumstances of your case. We will provide timely, practical advice on the statutory demand process, the likely costs involved and whether this is the most cost-effective route for recovering the money you are owed.

To discuss this matter further, contact Clough & Willis today on 0800 083 0815 or complete our online enquiry form to speak with a solicitor as soon as possible.

When can you serve a statutory demand?

You may be able to serve a statutory demand where a debtor owes money and has failed to pay. This route is usually most appropriate for undisputed debts where the amount owed is clear, due and capable of being calculated.

A statutory demand may be suitable where the:

●     Debtor owes money
●     Debt is due and payable
●     Amount owed is clear
●     Debt is not genuinely disputed
●     Debtor has failed to make payment
●     Previous requests for payment have been ignored
●     Debt meets the minimum amount required
●     Insolvency proceedings are a realistic next step

A statutory demand is a formal written demand requiring a debtor to pay a debt within a set period of time. It is not the same as starting ordinary court proceedings, but it can be used as a first step towards insolvency action if the debtor does not pay or reach an agreement.

A statutory demand can be used against an individual debtor or a limited company, but it should be used carefully. If there is a genuine dispute about whether the debt exists, or about the amount being demanded, another debt recovery route may be more appropriate.

For example, where there is a dispute about liability, contractual performance or the amount owed, it may be better to consider a county court debt claim, court proceedings or another form of court action before using a statutory demand.

Our solicitors can assess your circumstances and advise whether serving a statutory demand is the right legal step.

Serving a statutory demand correctly

If the demand is not prepared correctly, served properly or brought to the debtor’s attention in line with the insolvency rules, your position will be weakened and the debtor may have grounds to challenge the demand.

The insolvency rules require a creditor to take all reasonable steps to bring the statutory demand to the debtor’s attention. Where practicable, this will usually mean serving the demand personally. In many cases, creditors choose to use a professional process server, who can attend the debtor, effect service and provide evidence of the steps taken. This can be important if the debtor later argues that the demand was not properly served.

Our solicitors can advise on the correct form, the appropriate method of service and the evidence needed to demonstrate proper service.

What happens after a statutory demand is served?

Once a statutory demand has been served, the debtor has a limited period to respond. They may pay the debt, make proposals for payment, dispute the amount owed or take steps to challenge the demand.

If the debtor pays, the matter may be resolved without the need for further legal action. If the debtor ignores the demand, fails to pay, or does not reach an acceptable agreement, the creditor may be able to consider insolvency proceedings.

Where the debtor is an individual, this may involve presenting a bankruptcy petition. Where the debtor is a limited company, this may involve presenting a winding up petition. Before taking either step, it is important to review the debt, the evidence, the method of service and any response received from the debtor.

Often, the process follows these general steps:

1. Initial review

We review the debt, the supporting evidence, the debtor’s status and your commercial objective.

2. Advice on suitability

We advise whether a statutory demand is appropriate, or whether another route, such as a debt claim or other court action, may be more suitable.

3. Drafting the statutory demand

We prepare the correct form and ensure the debt, amount claimed, interest and supporting details are clearly set out.

4. Serving the statutory demand

We advise on service and, where appropriate, arrange for a process server to serve the statutory demand.

5. Considering the debtor’s response

The debtor may pay, propose repayment terms, dispute the debt, apply to set aside the demand, or fail to respond.

6. Advising on next steps

If the debtor fails to pay or reach an acceptable agreement, we can advise on whether a bankruptcy petition, winding up petition or alternative enforcement action is appropriate.

7. Explaining costs and risk

Before further steps are taken, we explain the likely court fees, legal costs, risks and potential outcomes.

What if the debtor applies to set aside the statutory demand?

A debtor may apply to set aside a statutory demand if they believe there are grounds to challenge it. This may include arguments that the debt is genuinely disputed, the amount claimed is incorrect, the debtor has a counterclaim or there has been a procedural issue with the demand or service.

An application to set aside does not automatically mean that the statutory demand must be withdrawn. However, it does mean the creditor should consider the position carefully and take prompt legal advice.

Should this happen, our solicitors will:

●     Review the debtor’s application and supporting evidence
●     Advise on the strength of the challenge
●     Consider whether the debt remains suitable for the statutory demand process
●     Prepare evidence in response
●     Advise whether to negotiate, withdraw the demand or oppose the application
●     Represent your interests if the matter proceeds to a court hearing
●     Advise on the risk of legal costs

In some cases, it may be commercially sensible to resolve the matter by agreement. In others, the creditor may have good grounds to oppose the application and ask the court to allow the demand to stand.

If the court sets aside the statutory demand, there may be cost consequences. Taking legal advice before serving the demand, and again if a challenge is made, can reduce the risk of unnecessary delay, expense or adverse legal costs.

Statutory demands after a court judgment

If you already have a court judgment and the debtor has still not paid, a statutory demand may be one option for escalating recovery.

This can apply where you have obtained a formal court judgment through county court proceedings, a debt claim or another court process, but payment remains outstanding.

Our solicitors can review the judgment, the amount owed and any payments made since judgment was entered. We can then advise whether a statutory demand is appropriate for recovering the outstanding court judgment debt, or whether another enforcement option may be better suited to your circumstances.

Statutory demand costs

The costs of serving a statutory demand will depend on the circumstances of the debt and the level of support required.

The costs involved may be affected by:

●     The value of the debt
●     Whether the debtor is an individual or limited company
●     Whether the debt is straightforward or complex
●     whether interest needs to be calculated
●     Whether the supporting evidence is clear
●     Whether a professional process server is required
●     Whether the debtor disputes the demand
●     Whether further legal action becomes necessary

We will explain the likely legal costs at the outset and advise whether serving a statutory demand is likely to be cost effective in your circumstances.

If a bankruptcy petition, winding up petition or other court action becomes necessary, we will also explain the likely court fees, legal costs and risks before you decide how to proceed.

Where possible, we will give you clear information about our fees before work begins.