A statutory demand is a formal document that a creditor sends to a debtor to demand payment of an undisputed debt.
Statutory demands can be served on either an individual or company. To serve a statutory demand, an individual must owe at least £5,000 and a company must owe £10,000 (this was previously £750 but the minimum debt amount increased during the pandemic).
The debt owed must be undisputed. Any dispute must be genuine however, and a debtor stating that the debt is disputed will not suffice. If the debtor disputes part of a debt, then a statutory demand can still be served in respect of the undisputed amount, if that reaches the minimum threshold.
The form of the statutory demand differs for individuals and companies, but the principle remains the same. It is a demand that states the debtor must make payment of the balance owed, or come to an agreement with the creditor, within 21 days of service. If the debtor does not settle the debt or secure for it to the creditor’s satisfaction, then the statutory demand would be used as evidence of the debtor’s insolvency when petitioning the court for either bankruptcy (individuals) or winding-up (companies). Whilst a statutory demand is often seen as a pre-requisite for insolvency petitions, there are a few limited situations where the requirement can be bypassed.
Once the statutory demand has been drafted it should be served personally on the debtor. For an individual, this means physically giving them a copy. For a company or other entity, if it cannot be hand delivered then it is deemed as good service by leaving the demand on the company’s property in a location that it will come to their attention – this includes fixing a copy to their front door, for example. If good service cannot be effected (particularly for individuals) then a court may be reluctant to issue a petition against the debtor. Following service, the debtor has a strict 21 days to pay the debt before a petition can be issued.
Debtors can, if they have a genuine dispute, apply for the statutory demand to be set-aside. This means in effect that it is as if it has never been served.
Most debtors fortunately understand the serious consequences of a statutory demand and will take heed after being served. It is therefore an effective method of getting debts paid to you.
With Debt-Claims, we charge £150 for drafting the statutory demand and then service costs are approximately £100. Both of these amounts are added onto the balance demanded from the debtor.