When Insolvency action is considered to be the most appropriate track to progress a debt recovery case, the first stage in the process is to issue a Statutory Demand.
A Statutory Demand is not a Court issued document, it is a formal demand for payment issued under the 1986 Insolvency Act.
Statutory Demands are an effective and powerful tool in recovering undisputed commercial debts over £750. The action informs the debtor in no uncertain terms of the seriousness of both the situation they are in and the consequences of failure to pay.
Serving a Statutory Demand
It is important to prepare and serve a Statutory Demand in accordance with the relevant legislation or it could be deemed invalid once presented in Court.
Given the strict timescales and significant implications set out in the 1986 Insolvency Act the Statutory Demand should be personally served on the debtor.
Advocate expertly prepare and administer Statutory Demands quickly, including personal serving of the demand effected with a sworn affidavit as required by law.
There are several advantages in the use of a Statutory Demand:
- Speed – the debtor has just 21 days from the date of service to pay or a winding up petition can be issued
- Cost – The cost for us to prepare a Statutory Demand is £175 plus VAT, personal serving of the Demand costs £75 plus VAT, this is usually a cheaper option than issuing a County Court Claim
- Severity – a Statutory Demand is a very strong and powerful threat to a company as failure to comply could result in the company being wound up
- Effectiveness – generally the use of a Statutory Demand results in settlement of the debt, even if the debt is not immediately paid in full, a satisfactory payment agreement is normally reached
- Risk – a Statutory Demand is not suitable if there is any possibility that the debt is disputed. If a demand is issued and a genuine dispute is raised, the demand can be set aside by the Court. You would then be liable to pay the legal costs of the debtor which could be considerable.
If there is any doubt that the debt is accepted and a genuine dispute may exist, we would recommend that a County Court Judgment be obtained before issuing a Demand.
If the debt is not settled within 21 days of serving the Statutory Demand you can Petition to Wind-up the company forcing it into compulsory liquidation. An Official Receiver would be appointed by the Court to liquidate the assets of the company to repay its creditors.
In most cases and unless the company is already considering liquidation, the prospect of facing a Winding-up Petition will lead to the debtor finding the means to settle your debt.