What is a statutory demand?

A statutory demand is a formal written document used in the realm of business and finance to demand payment of a debt owed by one party to another. This demand holds legal significance as it follows a specific statutory process outlined in relevant legislation.

It serves as a powerful tool for creditors seeking to recover outstanding debts, providing a clear and official notification to the debtor, indicating that they are obligated to comply with the statutory demand within 21 days of the demand being served.

Serving and issuing a statutory demand

To serve a statutory demand, the demand form must be delivered to the debtor through various methods, including personal service, registered post with a certificate of posting, or leaving it at the debtor’s registered office or principal place of business. Once served, the creditor must keep a copy of the proof of service on the debtor for their records.

What to do if you receive a statutory demand?

If you receive a statutory demand, you may wish to comply with the demand, or make an application to set aside.

You have 21 days from the date the statutory demand was served to either pay the debt or come to an agreement with the creditor.

You should ensure that the amount claimed is accurate and that the debt is actually owed. You may wish to verify the details of the creditor and the debt, including any supporting documents provided with the demand.

The simplest way to comply with a statutory demand is to pay the full amount owed within the 21-day period. Make sure to get a receipt or written confirmation from the creditor that the debt is settled.

If you are unable to pay the full amount, you may wish to contact the creditor to try and negotiate a payment plan or settlement. If an agreement is reached, ensure it is documented in writing.

If you wish to dispute the debt, you can apply to the court to set aside the statutory demand. You must do this within 18 days of receiving the demand. 

Having a statutory demand set aside

To set aside a demand, you must act swiftly and follow the necessary procedures. Outlined below are the key steps and requirements to have a statutory demand set aside:

Seek legal advice:

Setting aside a statutory demand is a complex process. It is advisable to seek legal advice to ensure that you follow the correct procedures and provide the necessary evidence to support your application.

Complete the application:

You must apply to the County Court using form IAA and include certain information in your application. This includes completing a witness statement in support of your application and providing three copies of each form to the court when you apply.

Explain your grounds:

When applying to set aside the demand, you should give your own details, explain that you are asking for a statutory demand to be set aside, and state the grounds for your application.

Grounds for setting aside the demand include:

• The debt is genuinely disputed.
• The creditor owes you money that can offset the claimed debt.
• The demand was issued improperly (e.g., procedural errors). 

Provide written evidence:

If you are challenging the demand, you will need to provide written evidence to support your case. This may include evidence that the debt is disputed or evidence that you are unable to pay the debt.

Keep records:

It is essential to keep a copy of the demand and anything that confirms the time and date you served the demand, as this information will be needed if your demand is ignored.

Understand the consequences:

If the court is satisfied that your reasons for challenging the demand are valid, it will set aside the demand. However, if the court is not satisfied, the demand will stand, and the creditor may take legal action against you for the debt. 

Legal advice and bankruptcy proceedings

Challenging a statutory demand is a complex legal process, and debtors are advised to seek legal advice from a qualified debt advisor or solicitor.

Failure to comply with a demand may lead to further legal actions, such as the creditor applying for a bankruptcy petition or issuing a winding-up petition, particularly for limited companies.

If the debtor fails to respond to the demand within the stipulated time, the creditor may proceed with these legal actions.

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 are still asking the question “what is a statutory demand?” we would recommend speaking to a solicitor who is experienced in the field.

If you would like to issue or defend 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