What is a statutory demand?

A statutory demand is a formal written request for debt payment, serving as a legal precursor to potential legal actions for debt recovery. Creditors often utilise statutory demands in the context of business-related debts.

Key points regarding statutory demands include:

• Formal requirements: Statutory demands must adhere to specific legal criteria concerning their format and content. Non-compliance with these requirements may render the demand invalid.
• Debt threshold: A creditor must meet substantial grounds in order to issue a demand. A statutory demand can only be issued for debts surpassing a particular monetary limit. This is usually in cases where a company owes a minimum of £750 or an individual owes a minimum of £5,000, and the creditor has made repeated unsuccessful attempts to recover the debt.
• Time limits: Debtors typically have a specified period, often 18 to 21 days, to either pay the debt or negotiate an agreement. Failure to comply within this timeframe allows the creditor to pursue further legal action.
• Consequences of non-compliance: If the debtor fails to respond within the specified time, the creditor may initiate legal actions, such as filing a winding-up petition or issuing a bankruptcy petition, depending on the debtor’s nature (individual or company).
• Setting aside a statutory demand: Debtors can, in certain cases, apply to the court to set aside a statutory demand, citing reasons like a genuine dispute, defects in the demand, or other valid grounds.

In situations involving a statutory demand, whether as a creditor or debtor, seeking legal advice is crucial to ensure compliance with applicable laws and understanding rights and obligations.

ARC Costs maintains a network of commercial law solicitors to assist with disputes involving statutory demands. For more information on our services, please contact us.

Service of a statutory demand

To serve a statutory demand, the creditor must deliver the demand form to the debtor using one of the following methods:

• Personal service: Providing the demand form to the debtor in person, offering proof of receipt.
• Registered post: Sending the demand via registered post with a certificate of posting, providing evidence of dispatch.
• Leaving at registered office: For companies, leaving the demand form at the registered office, ensuring accuracy.
• Leaving at principal place of business: For non-company debtors, leaving the demand form at their principal place of business, verifying accuracy.

After serving the demand form, retain a copy of the proof of service for record-keeping.

Challenging a statutory demand

A debtor can have a statutory demand set aside by making an application to the Court. This is usually done in circumstances where the debt is disputed or unpayable. The debtor must apply to set aside the demand within 18 days of receipt of the same, and additional information should be provided if the 18-day timeframe has passed.

Common grounds for challenging a statutory demand include:

• Disputing the debt
• Debt amount below the statutory minimum
• Defects in the demand’s form or content
• Counterclaim, set-off, or cross-demand equal to or exceeding the debt amount

When challenging a statutory demand, supporting evidence must be provided to the court (alongside application forms), such as proof of a disputed debt, a witness statement or inability to pay.

If the court finds the reasons valid, the demand will be set aside, preventing further legal actions. However, if the reasons are not accepted, the demand stands, potentially leading to court proceedings and associated costs.

Challenging a statutory demand is a complex legal process, and seeking advice from a qualified debt advisor or solicitor is essential if considering this course of action.

How can ARC Costs assist?

ARC Costs can assist will all aspects of claiming or defending statutory demand costs.

ARC Costs are a team of independent and experienced Costs Draftsmen and Costs Lawyers who regularly assist you in the recovery/contention of costs.

If you require assistance in making an application to set aside a demand, ARC Costs also maintain an extensive legal network of expert Solicitors in this area, and we would be happy to pass on your details to assist in recovering your outstanding debts.

We may receive payments from third party solicitors on our panel to whom we may refer your claim. We will never charge you for any referrals made to our panel of third parties.