020 8308 3610 contact us

Statutory Demands and Corporate Insolvency

FIND OUT MORE

A statutory demand is a formal request for payment of a debt that is served on a company. On this page, we will outline the steps on serving a statutory demand on a company and how a statutory demand could be challenged.

A statutory demand is a formal request for payment of a debt that is served on a company. On this page, we will outline the steps on serving a statutory demand on a company and how a statutory demand could be challenged.

If you wish to serve a statutory demand on an individual or are an individual who wishes to challenge a statutory demand, please visit the Serving a Statutory Demand or Challenging a Statutory Demand sections on our website.

When would you need this service?

A statutory demand is commonly used when a creditor is owed a sum of money that exceeds £750, the debt is not disputed and the company has not made payment. The creditor ultimately claims the company is unable to pay its debts by serving a statutory demand.

A statutory demand can be served on the following:

  • A company registered and situated in England and Wales;
  • An unregistered company, defined as “any association and any company, with the exception of a company registered under the Companies Act 2006 in any part of the United Kingdom”; and
  • A limited liability partnership.

Once the statutory demand is served, the company is given three weeks to make payment of the debt. If they fail to make payment, the creditor can issue a winding up petition against the debtor.

How does the process work?

When arranging a statutory demand, the following elements must be included in line with Insolvency Rules 2016:

  • The name and registered office of the company must be correctly identified;
  • The creditor must provide their name and address;
  • A statement containing the total debt amount and any consideration for it;
  • Details of the debt and how it arose;
  • If the debt is founded on a judgment of the court, the date of the judgment and the name of the court it was obtained from;
  • a statement that the company must pay the debt claimed in the demand within 21 days of service of the demand on the company after which the creditor may present a winding-up petition unless the company offers security for the debt and the creditor agrees to accept security or the company compounds the debt with the creditor’s agreement;
  • a statement that the company has the right to apply to the court for an injunction restraining the creditor from presenting or advertising a petition for the winding up of the company; and
  • Details of any interest and/or any other charges that may be accruing.

The statutory demand must be signed by the creditor or an individual authorised by the creditor to sign on their behalf.

In practice, a process server is commonly used to serve the statutory demand. It is important that the process server is instructed to serve the demand at the registered office address.

How can I challenge a statutory demand?

If your company has received a statutory demand, we strongly recommend that you take immediate action.

  • If the debt is disputed on substantial grounds, you may wish to consider applying for an injunction to prevent the creditor from issuing the winding up petition.
  • There may be technical grounds on which the statutory demand can be challenged.
  • You can make payment of the debt. If you make payment, we recommend you seek confirmation from the creditor that they will not present a winding-up petition, preferably an undertaking.
  • You may be able to negotiate payment of the debt in instalments. However, whilst negotiations are ongoing, the creditor has the ability to issue a winding up petition against you.

How long does it take?

Once a statutory demand is served, the company has 21 days to take one of the steps above. After this, if the debt is still outstanding and no action has been taken, a creditor can take formal insolvency proceedings against the company

How much is it likely to cost?

Our cost for preparing a statutory demand will be as follows:

Value of debt Our fee
£750-£49,999.99 £1,000 plus VAT
£50,000.01-£100,000 £1,500 plus VAT

In addition to the above the process server’s fees will be in the region of £100 – £150 + VAT.

If the statutory demand is challenged by the company or we are required to correspond with the company further, such costs will usually be calculated with reference to the hourly rate of the solicitor who is acting on your behalf.

If you are a company who wishes to challenge a statutory demand, our bankruptcy solicitors will be able to provide you with a fee estimate depending on the circumstances surrounding the challenge.

If you require any further information on issuing or challenging a statutory demand, please contact our team of experts by emailing insolvency@bankruptcy-solicitors.com or call 020 8308 3610 today.

Meet the Statutory Demands and Corporate Insolvency team