AMD Solicitors advises on the use of Statutory Demands which can help business recover any unpaid debts that are long overdue.
Within the normal course of business affairs invoices are not always paid immediately but there are occasions when clients have approached me expressing serious doubts regarding a business debtor’s intention to pay.
One method of recovery is the issuing of a statutory demand. Provided that the debt exceeds £750 a statutory demand may be served on individual debtors or companies alike. There is no Court fee payable but the service of the statutory demand must be made personally on the individual debtor or at the company registered address.
Following service the company or individual must act promptly. A statutory demand provides for 21 days for a debtor to pay up or otherwise satisfy the creditor. On expiry of this period the creditor can issue a petition for bankruptcy or to wind up the company.
Contesting a Statutory Demand
Of course there are procedures for debtors to contest a statutory demand. Individual debtors can apply to the Court to have the demand set aside and similarly a company debtor can apply for an injunction preventing the creditor from commencing with their petition. This must be made within strict time limits.
If you are a creditor you might be forgiven for thinking so far so good perhaps but there is an important caveat to statutory demands. They are not appropriate if there are genuine grounds for dispute in relation to the debt. What constitutes genuine grounds for dispute is subject to a plethora of case law and a matter for legal professionals. Should matters proceed to a hearing the judge may rule in favour of a debtor and order the creditor to pay costs.
The service of a statutory demand is certainly a potent weapon available to a creditor. Proper consideration though must be given to ensure that this is the most appropriate course of action. Courts will be unsympathetic to a creditor who is believed to have abused the procedures. Some creditors consider statutory demands a useful and cheap tactic to force a debtor into negotiations but care must be taken if it is considered that the debt could be viewed in anyway contentious .