When a company has unpaid debts, creditors can choose to send a statutory demand, which is more like a final ultimatum for the payment. In most cases, process servers are hired for the purpose, as a statutory demand cannot be sent by post. A process server can confirm proper service to the court, which is important. In case of a company, the statutory demand can be left at the registered office or can be handed over to the company director, secretary, or principal officer.
From the day of the service, the company has 21 days to repay the sum as demanded in the statutory demand. Otherwise, a winding-up petition can be issued by the creditors, as deemed appropriate, if the debt exceeds £750. Known services like Business Rescue Experts recommend that a statutory demand should be taken seriously, especially when a company is serious about continuing business.
Responding to a statutory demand
There are three choices available to a business after receiving a statutory demand. The first and obvious choice is to repay the asked debt in full, within 21 days of service. The second option is to negotiate a payment plan with the creditors. Or else, they can choose to apply for an order to set the statutory demand aside. The only reason why a company may refuse to respond to a statutory demand is when it’s insolvent and is practically prepared for the winding up process.
Setting aside a statutory demand
When a company wants to dispute the debt demanded on a statutory demand form, an application must be filed to set the form aside. The same must be filed within 18 days of service and only in a situation when one has good grounds. Do not use this as an option to delay the payments, because a costs order will be made against the company, which will only increase the debt.
The follow grounds can be used to set a statutory demand aside
- The debt is disputed
- The debt is less than £750 for the concerned company
- There’s a counterclaim against the amount due
- The statutory demand was not prepared or served properly
If the court rules in favor of the creditors and says that the statutory demand should stand, the creditors can issue a winding up petition immediately. You can go for a creditors voluntary liquidation, which might be a better choice, but make sure that you seek the right advice.