When faced with a debtor who cannot pay, how do businesses maximise recovery without overextending themselves in the process? Serving a Statutory Demand can be an effective way of persuading reluctant debtors to engage in settlement discussions while putting themselves in a powerful position to take further insolvency action.
At Saunders Law, we are a partner-led niche litigation law firm based in Central London. We assist individual and business clients with a wide range of contentious legal matters.
Our lawyers handle in a wide array of complex and high value litigation matters and our clients come to us from all over the world for our first-class reputation and high success rate.
We regularly advise medium to large businesses, national and international organisations and high net worth individuals. We specialise in high value commercial litigation work, usually involving debts in excess of £100,000. We also have substantial international litigation experience, pursuing insolvent debtors across Europe and beyond.
Find out more about the firm, its teams and its typical work by taking a look at our clients.
Speak to our Statutory Demand solicitors in London
For expert assistance with Statutory Demands, Winding Up or Bankruptcy proceedings and other advice about recovering personal or business debts, contact Saunders Law today for a free, no obligation initial discussion of how we may be able to help.
Call us on 02076324300 or make an enquiry online.
Statutory Demands during Covid-19
During the Covid-19 pandemic, the government suspended the use of Statutory Demands under the Corporate Insolvency and Governance Act 2020 to give indebted businesses ‘breathing room’. Winding Up Petitions were also suspended in respect of debtors affected by the pandemic.
These restrictions were partially lifted on 1 October 2021. Creditors are still unable to serve Winding Up Petitions based on Statutory Demands served between 1 March 2020 and 30 September 2021.
The following temporary measures are also in place until at least 31 March 2022:
- The minimum debt level a creditor must be owed before they can present a Winding Up Petition has been increased from £750 to £10,000
- Before issuing a Winding Up Petition, creditors must request settlement proposals from the debtor, allowing them 21 days to respond.
Where commercial rent arrears and other payments under the business tenancy (such as service charges) are concerned, creditors will likely not benefit from issuing a Statutory Demand in respect of rent arrears accrued due to the coronavirus pandemic. This is because the government intends to legislate to ringfence such arrears and introduce a binding arbitration process for commercial landlords and tenants. As such, there are continuing restrictions on the service of Winding Up Petitions based on commercial rent arrears.
Give us a call to discuss options for pursuing an insolvent debtor post-Covid-19 restrictions, or visit our High Value Debt Recovery page for more general information about recovering outstanding debts.
In particular, if the unpaid debt is approaching six years from the date it was incurred or acknowledged by the debtor, get in touch as soon as possible. Debts outside the standard unsecured debt limitation period of six years may become unenforceable.
Serving Statutory Demands
Note – due to Covid-19, under the Corporate Insolvency and Governance Act 2020, Statutory Demands issued between 1 March 2020 and 30 September 2021 cannot form the basis of a Winding Up Petition.
Statutory Demands issued during this time span can still be used as a pre-cursor for bankruptcy proceedings against individuals, including guarantors of business debts.
It is a requirement that creditors serve a Statutory Demand before taking formal winding up or bankruptcy action. Our Insolvency team’s service covers:
- Explaining the Statutory Demand process and the timescales involved
- Drafting Statutory Demands in the prescribed form
- Assisting with service of Statutory Demands
- Engaging in settlement negotiations with the debtor, providing advice on any offers and drafting settlement contracts
- Providing advice on taking further insolvency action
Specialist advice about Statutory Demands in London
We know just how frustrating and disruptive it can be when businesses are forced to divert valuable time and resources towards chasing debt and stringently managing any resulting cash flow issues.
The situation can become increasing concerning if it becomes clear that the debtor – whether they are a customer, client or a third party company – does not have the means to repay you because they are insolvent.
Our specialist insolvency solicitors can help businesses explore their options, including taking steps to wind-up an indebted company or bankrupt an indebted individual. The first step in the insolvency process is to serve a Statutory Demand – a formal legal document that demands repayment of the outstanding debt within a certain timeframe.
Issuing a Statutory Demand on the debtor can provide businesses with two effective options:
- It can compel a reluctant debtor to finally engage in repayment negotiations.
- It puts the business in a position to start insolvency proceedings to wind up (if a company) or bankrupt (if an individual) the debtor if negotiations are unsuccessful.
How our insolvency experts can help
General advice about debt recovery and insolvency
Instigating insolvency proceedings against an indebted business or individual is rarely a first resort. We help businesses understand the reality of winding up or bankrupting a debtor, exploring all the debt recovery options available and undertaking a costs-benefit analysis of taking action.
In some cases, a Statutory Demand can be a doorway to further negotiations, but it is beneficial to explore alternative pre-action debt recovery options before taking this path. Read more about High Value Debt Recovery options here.
Serving Statutory Demands
Note – due to Covid-19, Statutory Demands against companies are temporarily suspended until 30 September 2021 under the Corporate Insolvency and Governance Act 2020. Get in touch for bespoke advice about alternative methods of proving debts for the purposes of winding up a company.
Statutory Demands can still be used as a pre-cursor for bankruptcy proceedings against individuals, including guarantors of business debts.
It is a requirement that creditors serve a Statutory Demand before taking formal winding up or bankruptcy action. Our Insolvency team’s service covers:
- Explaining the Statutory Demand process and the timescales involved
- Drafting Statutory Demands in the prescribed form
- Assisting with service of Statutory Demands
- Engaging in settlement negotiations with the debtor, providing advice on any offers and drafting settlement contracts
- Providing advice on taking further insolvency action
Serving Statutory Demands on companies
Statutory Demands can be used to recover debts from limited companies and is the required precursor to winding up proceedings to close down an insolvent company and distribute its assets to its creditors.
Form
There is one prescribed form used to demand repayment of a debt from a limited company. This form must be completed correctly to ensure that there are no grounds to set aside the Statutory Demand or defend a future Winding Up Petition.
As part of our service, our insolvency solicitors draft and review the Statutory Demand – the final copy of which is always signed off by one of our qualified specialists – to ensure it is completed to the highest degree of accuracy.
Service
A Statutory Demand can be served upon a company by delivering it to the registered office of the company (or their main place of business if there is no registered office) or delivering it to the company’s director, company secretary, manager or principal officer.
Failure to serve the Statutory Demand correctly could result in it being set aside and/or provide a defence to further winding up proceedings. As such, we handle this process for our clients, ensuring that all necessary requirements are complied with.
Time scales
The Statutory Demand must typically be served within six years of the debt arising or the last time the debtor acknowledged the debt. Where the limitation date has passed, it is possible to apply for permission, providing the reason is sufficient.
The company has 21 days to respond to the Statutory Demand, either to repay the debt or enter into settlement discussions. If the creditor wants to take further action to wind up the company, they should petition within four months.
Serving Statutory Demands on individuals
Statutory Demands can be used to recover debts from individuals, including individuals in a personal capacity, sole traders or partners in a partnership. It is the required precursor to bankruptcy proceedings to distribute the debtor’s assets to their creditors.
Form
There is a prescribed Statutory Demand form that must be used to commence insolvency proceedings. The type of form used depends on the circumstances of the matter, for example, a Statutory Demand may be served further to a court order or money judgment or simply where a creditor is owed money which is payable immediately.
If a form is not filled in correctly, there may be grounds for setting the Statutory Demand aside or to defend any Bankruptcy Petition. Our insolvency lawyers are highly experienced at drafting and serving Statutory Demands and can guarantee that it will be completed to the highest degree of accuracy.
Service
A Statutory Demand must be served by personally giving it to the individual, unless this is not practicable. The rules surrounding service are complex, so our team will handle these aspects, including instructing process servers, negotiating with the debtor regarding service where required and assisting with service of Statutory Demands abroad.
Where alternative service has been necessary, this will not prevent the further service of a Bankruptcy Petition from being valid.
Time scales
The Statutory Demand must typically be served within six years of the debt arising or the last time the debtor acknowledged the debt.
Upon valid service of a Statutory Demand, the debtor has 21 days to pay or engage in settlement negotiations. A business does not have to issue Bankruptcy proceedings immediately once this time period is up, but should bring their Petition within four months if required.
Settlement negotiations
Further to the service of a Statutory Demand, we assist businesses with settlement negotiations. We seek to take an open but firm approach to maximise recovery and secure a commercially-realistic settlement within the time scales set out under insolvency law.
Responding to applications to set aside a Statutory Demand
A debtor may make an application to strike out a Statutory Demand within 18 days of service. Their reasons may range from having an issue with the debt itself to allegations that demand was made outside of the legal time limits.
We have substantial experience representing creditors in relation to these types of proceedings, including providing advice prior to service about any risks or potential grounds for setting aside the Statutory Demand and steps businesses can take to mitigate.
Winding Up Orders & Bankruptcy Orders
If the debtor does not respond to the Statutory Demand, refuses to repay or settlement negotiations are unsuccessful, we assist businesses to take further insolvency action. This involves serving a Winding Up Petition or Bankruptcy Petition with the goal of obtaining a Winding Up Order (to close down a company) or a Bankruptcy Order (to bankrupt an individual).
As well as the technical aspects of preparing the Petition and checking for any existing insolvency petitions against the debtor, we have extensive experience representing businesses in defended winding up and bankruptcy proceedings
Upon obtaining an Order, we also have expertise proving in debts with Official Receivers and Insolvency Practitioners to claim a proportion of the debtor’s assets once distributed (if any).
Why Saunders Law is the smart choice for serving Statutory Demands
Over 40 years’ experience
Our partner-led team have over 40 years of specialist commercial litigation knowledge and experience. This means we are perfectly placed to provide tailored advice which, as well as being technically accurate, is practical and commercially sound within the context of our individual clients’ businesses.
Independently recognised expertise
Our team has been independently recognised for our leading litigation expertise by prestigious client guides, the Legal 500 and Chambers & Partners.
A bespoke service
Every business faces a unique set of challenges and opportunities. We plan our strategy with our client’s priorities and commercial goals in mind, tailoring our expertise to fit the circumstances at hand. Our experience includes handling complex and often highly
contentious negotiations and conducting court litigation. Our goal at all times is to maximise our clients’ returns while balancing the pressures of litigation and keeping costs proportionate.
The highest levels of client care
We are proud to offer a welcoming, personal service to our clients. Following their enquiry, clients can expect to receive a call back the same working day and our partners are always available to speak to when required. As a result, we receive excellent client feedback.
Proportionate fees
Costs are typically a concern for our clients and we provide proportionate, upfront options to help businesses budget effectively. For information about our fees, visit our pricing page.
Speak to our Statutory Demand solicitors in London
For expert assistance with Statutory Demands, Winding Up or Bankruptcy proceedings and other advice about recovering personal or business debts, contact Saunders Law today for a free, no obligation initial discussion of how we may be able to help.
Call us on 020 7632 4300 or make an enquiry online.