December 4, 2012

Issuing a statutory demand

This post was written by: Aston Bond Law Firm

There are many ways in which either individuals or companies can attempt to reclaim monies owed to them by debtors. However, the best way to begin this process is by sending a letter before action that complies with the pre-action protocol. The benefits of sending this type of letter are that if the matter becomes protracted and it then becomes a requirement to go to court, the courts look favourably upon the fact that you made all attempts to resolve the matter before initiating litigation. It must be remembered that litigation is a process of last resort. This letter sets out your claim, the reasons why your claim has come about and timeframes in which the individual or the company must pay the debt. It may also work in getting you money back quickly and with little expense.

If however, this procedure does not prove to be fruitful you may then attempt to use what is known as a statutory demand. A statutory demand is a claim for monies owed to you by a debtor that has not paid and may only be used for a debt of more than £750. This is an exceptionally useful tool for both individuals and companies, once this document has been served the debtor has 18 days in which to either set aside the statutory demand or to obtain an injunction in the case of a company, however, they have 21 days in which to pay the money that is owed. If they fail to pay following the service of the demand you may then make an application to court either to have the company wound up or to issue a bankruptcy petition against the individual. Care must be taken when using this procedure as if the debtor is a company you are then obliged to put a notice in the London Gazette of the fact that the winding up petition has been issued against the company and this will then in turn alert all other creditors of the company that there is a petition being issued. If there are creditors of the company that have either fixed charges, floating charges or first charge holders they will then take precedence over any debt owed to you if you are not a secured creditor.

If however, the debtor is an individual you are then able to make a petition to have the individual made bankrupt. Again this is a catch all scenario and the same provisions as already stated above shall also apply.

It is also pertinent to mention that it is critical that the information contained within a statutory demand is correct and accurate as any material errors may mean that the statutory demand is defective and therefore the debtor can ask the court to set aside the statutory demand. There are also other instances where the court may set aside the statutory demand, for instance if the debt is disputed. If it is clear on the face of it that there is likely to be a ‘genuine’ dispute between the parties then this procedure may not work and you may then need to issue a claim in the County Court.

Service of the statutory demand is also very important, if the statutory demand is not served correctly it may then also become defective. Therefore, it is always a good idea to have the statutory demand served by a process server or alternatively to serve the statutory demand on either the individual personally or if a company by personal service and then complete a certificate of service.

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