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A Statutory Demand is a legal formal demand served by a creditor against either an individual or a company for a debt owed by the debtor to the creditor for more than £750 if the debtor is a company or more than £5,000 if the debtor is an individual.
A Statutory Demand should only be served by a creditor in circumstances where the debt in question is undisputed. If there is a genuine dispute then, instead of issuing a statutory demand, the creditor should bring a county court claim (known as a Part 7 claim) for the dispute to be determined by the court. However there seems to be a growing trend for creditors/debt collectors to use the service of statutory demands as a debt collection tool for debts that are, or could be, disputed.
Once a Statutory Demand is served the debtor (individual or company) has 18 days to make an application to court to set aside the statutory demand. The Statutory Demand should contain the details of the court the application to set aside should be made to.
If the application is not made by the debtor within the 18 day period the creditor is in a position after 21 days from service of the Statutory Demand to issue a bankruptcy petition for an individual debtor, or a winding up petition for a company.
Applications to Set Aside a Statutory Demand
The Insolvency (England and Wales ) Rules 2016, which can be accessed at https://www.legislation.gov.uk/uksi/...cle/10.48/made , govern the service and set aside of Statutory Demands. Rules 10.4 and 10.5 are applicable for setting aside a Statutory Demand. ‘Setting aside’ a Statutory Demand means making an application to the court for a court order which cancels it.
The Statutory Demand need to be carefully checked to see if it is compliant with the Insolvency Rules, including the legitimacy of the debt specified in the demand, and if the required legal procedures for service have been followed by the sender. If the Statutory Demand has been served by an assignee then they should be required to provide evidence of a legal assignment.
Time Period
The application to set aside a Statutory Demand must be made by the debtor, within 18 days from the date of service of the Statutory Demand. The filing of the application stops the clock ticking on the 18/21 day time periods.
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