What should you do if you receive a statutory demand?

By December 4, 2012Litigation

It is critical upon receipt of a statutory demand that you deal with it in an expedient manner. A statutory demand is a very important document that could ultimately lead to either your bankruptcy if you are an individual or your company being issued with a winding up petition and therefore ultimately being wound up.

If you have personally had a statutory demand issued against you, you must either pay the debt that is owed or dispute the debt directly with the petitioner. If no agreement can be reached relatively quickly directly with the petitioner you must then make an application to the court to have the statutory demand set aside. There is going to be a hearing in relation to this application and you will therefore need to make sure and ensure that you are prepared for the hearing with documentary evidence and your statement with the application must be very detailed. The court will generally set aside a statutory demand if there is a ‘genuine’ dispute between the parties, therefore, it is your responsibility to prove that there is a genuine dispute between yourself and the petitioner. The court will not entertain the facts of any dispute between the parties and will not make a judgment on this, however, the court are only interested in the mere fact that there is a genuine dispute between the parties. The Court may also set aside the application if there is a genuine counter claim for equal to or more than the sum being demanded.

If the statutory demand is issued against the company, the company cannot make an application to have the statutory demand set aside, however, they must make an application to the court for an injunction against the petitioner issuing a winding up petition against the company. It is also important as part of this application that the petitioner does not advertise the fact that they will issue a notice in the London Gazette.

If the winding up petition is advertised in the London Gazette the banks monitor the fact that a winding up petition has been issued against the company and therefore freeze the company’s bank account. This has the effect that it will of course affect your ability to be able to trade as a business and get access to vital money to pay suppliers. The only way to unfreeze the accounts is to make an application for a validation order this will require documentary evidence that there is a genuine dispute or that the company is able to pay its debts, there will be hearing on this issue.

It is important that any statutory demand that it issued against you individually or the company is dealt with very quickly as this may also alert other creditors and they may also begin their own actions for enforcement.

Jagdeep Sandher, Solicitor

jsandher@astonbond.co.uk