A Statutory Demand is issued under the Insolvency Act 1986. It is the first step in the legal process to apply for a Bankruptcy Petition in the case of an individual or a Winding Up Petition in the case of a limited company. There are 3 different types:
The Statutory Demand calls upon the debtor to deal with the demand within 21 days of service either by satisfying the debt, compounding it or securing it. A statutory demand may be issued by the creditor who is owed the debt or by a person instructed by them. If the debtor fails to comply with the demand then the creditor may start the process of obtaining a bankruptcy petition against an individual, or a winding up petition against a limited company.
A Statutory Demand can be issued as soon as the debt is due. There is no need to obtain a court judgment first. There is a set format to a Statutory Demand. All you need to do is download and print the form which you can then fill in in longhand. There is no need for it all to be printed.
Download Statutory Demand forms in MicroSoft Word format:
Statutory Demand under section 268(2) of the Insolvency Act 1986 - debt payable at future date
You must fill out all the sections. The Statutory Demand must be dated and signed.
A Statutory Demand can be served personally or by substituted service.
Personal service means that in the case of an individual a copy of the demand is handed to the debtor.
In the case of a limited company a copy of the Statutory Demand is handed to an officer (a director or the company secretary) of the company, an employee of the company or a person who is "authorised to accept service of documents on behalf of the company" at the company's Registered Office. Most commonly a person authorised to accept service of documents on behalf of the company is an employee of a firm of accountants or solicitors whose offices are the location for the company's Registered Office. If the Registered Office is unattended the Statutory Demand can be left in such a position that it is likely to come to the attention of a person attending at the Registered Office.
Substituted Service of a Statutory Demand only really applies in the case of individuals. If it is not possible to serve the Statutory Demand personally then a letter of appointment which follows a specified wording can be sent to the debtor and if they do not keep the appointment the Statutory Demand can be served by substituted means which usually involves posting it through the debtor's letterbox but can involve advertisement or other means.
There is nothing to stop you serving a Statutory Demand yourself but beware. The rules on service are quite complicated and a failure to follow the correct procedure will not only invalidate the process but may also make the person issuing the defective demand liable for very substantial costs.
Even sector professionals like solicitors and insolvency practitioners use a Process Server to serve Statutory Demands even where the person to be served is local. In choosing your Process Server you should ensure that the company or individual is sufficiently professional and competent to carry out your instructions. There is currently no regulation of this industry sector in the United Kingdom and effectively anybody can call themselves a Process Server. You might check that your Process Server is registered with the Information Commissioners Office and that they have in place professional indemnity insurance should anything go wrong.
A wrongly served Statutory Demand can result in an expensive court case. It is open to the person served to apply to the court within 18 days of service to have the Statutory Demand set aside if the amount is disputed, the demand was issued in error, the debt does not exceed a certain minimum amount, and several other grounds but in addition to all these matters the service has to be carried out correctly. A competent and professional Process Server covered by insurance is a must.
There is a widespread belief that issuing a Statutory Demand is an effective way of frightening people to pay up when in dispute over a financial issue. This is quite wrong.
Its important to remember that a Statutory Demand can only be used for a debt which has crystallised, in other words the amount is set and the debt in itself is not in dispute. A person served with a statutory demand may apply to a court to have the demand set aside under certain circumstances which include where the debt is disputed. Issuing a Statutory Demand is therefore not a way of pursuing a claim that is disputed.
The debt must be at least £750.00.
There are of course pros and cons:
but on the other hand:
It makes sense to exhaust other avenues of recovering the debt first, particularly by writing a series of letters of which you keep copies that you can evidence later in the process if need be.
If there is no dispute about the amount and the debtor has acknowledged the debt in writing and you know that the debtor has the means to pay the debt then you cannot go far wrong by issuing a Statutory Demand, provided you are willing to follow it up.
The simple answer is seek legal advice if in any doubt as to what you should do. If you cannot afford to see a solicitor then the Citizens Advice Bureau and many other funded organisations exist to help you. A sample of links you might find useful are shown below but a simple Google search will almost certainly point you to somewhere local to you.
There are some simple steps you can take:
Download an Application to Set Aside a Statutory Demand form in MicroSoft Word format:
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