A Statutory Demand should only be issued in respect of an undisputed debt, if you dispute the debt and you are an individual you can apply to the Court to have the demand Set a Side. If you’re a company it is more complex, but importantly you must contact the other-side or creditor and formally advise them of the grounds for the dispute and request the demand be withdrawn.
When you receive a Statutory Demand, it’s important to seek expert legal advice straight away as there are a number of actions you can take to stop a demand becoming a Winding Up Order (in the case of a Company) or Bankruptcy Order (in the case of an individual).
A Statutory Demand issued to an Individual
You only have 18 days from the receipt of a Statutory Demand to make an application to the court to set aside a Statutory Demand. The process is not expensive and involves submitting an application backed up by a statement of fact and a witness statement and attending court to argue your case. If the court agrees that the debt can be questioned say as a result of goods and services not being of sufficient quality then they will set aside the Statutory Demand and if the creditor has abused the process when they clearly knew there was a dispute then your costs will be awarded against them.
Top Tip
The cost of making an application to set aside a Statutory Demand is very small, and 4R would recommend that it is well worth the small investment to secure control of the situation. 4R will advise you of the merits and strength of your case as part of our free consultation, then we will either get the other side to withdraw the Statutory Demand or make the application to the court for you. Remember issuing a winding up or a bankruptcy petition is very expensive so creditors will normally issue a winding up petition if they are convinced there is not a dispute.
If a creditor is simply ignoring the grounds of your dispute and using the Winding Up Process to bully you into paying up then they will normally withdraw the Statutory Demand when advised you intend to seek to Set a Side the demand and will rely on a more normal debt recovery processes such as dispute resolution out of court or a County Court Summons to allow the court to decide on the merits of any dispute.
If you do not set aside the Statutory Demand then after 21 days the creditor has the legal right to issue a Winding Up Petition in the case of a Company or Bankruptcy Petition in the case of an Individual.
The court tends to take the view that if you have failed to seek the remedy of a set aside in time that an individual has tacitly acknowledged the debt and it is, therefore, dangerous to rely on defending the claim at the court hearing to determine if an individual should be made bankrupt. Notwithstanding this, the courts are generally reluctant to make an individual bankrupt at a first hearing, and only allow 10 mins to hear the petition. If there is a dispute the court is more likely to adjourn the hearing to give the parties an opportunity to reach an agreement by consent or to hear the substantive issues at a full hearing.
A Statutory Demand issued to a Company
This is more complex as a Company does not have the same right to seek a set aside hearing. Legal remedies are available including injunctive action and the threat of seeking damages. However, if a clear commercial dispute exists the other side has a duty of care to respond and enter into a dispute resolution service. The next step of issuing a winding up petition is both expensive and serious. Any spurious claims or unresolved disputes are going to be looked at by the courts and damages and cost awarded if the other side has abused the process.
Top Tip
The cost of making an application to set aside a Statutory Demand is very small and 4R would recommend that it is well worth the small investment to secure control of the situation. 4R will advise you of the merits and strength of your case as part of our free consultation, then we will either get the other side to withdraw the Statutory Demand or make the application to the court for you. Remember issuing a winding up or a bankruptcy petition is very expensive so creditors normally will normally issue a winding up petition if they are convinced there is not a dispute.
If in doubt, call us on 0800 0385 140 for advice. Whatever your circumstances are 4R Business Recovery can and will be able to help you. Simply get in touch with an expert today on 0800 0385 140 to get free advice that will help you cancel out the stress of dealing with any issues you may be facing.
If you agree that you owe the money but do not have the cash to pay the debt then you need to consider if you or your business are solvent or insolvent or if the inability to pay the debt is a temporary cash flow problem or a lack of liquidity and potentially seek a more formal insolvency solution to get control of the situation.
Top Tip
Understanding the current strength of your finances or balance sheet is not always easy and establishing solvency or insolvency and forecasting cash flow can be difficult, why not take advantage of 4R free and independent Solvency and Cash Flow Audit. If in doubt, call us on 0800 902 0123 for advice.
The fact that you or your business cannot pay the debt is the clue that you or your business are probably insolvent but this insolvency could be the result of a one-off event such as a bad debt or legal claim that has impacted on cash flow or increased the debt burden. If the underlying cash flow is strong and the business fundamentals are good and given time you could pay the debt then 4R can offer you a number of resolutions to get back in control of your life and your business.
Time to Pay Agreements
You must contact the creditor asap and try to and make arrangement to repay the debt over time or even in some cases by offering to ‘secure’ the unsecured debt by way of fixing it against an asset. You can do this yourself but it is worth considering turnaround specialist who would draw up a statement of affairs and an outcome statement and understand how to present your case and stands a better chance of securing a time to pay arrangement. For a small investment, 4R can negotiate and get contracted time to pay arrangements in place that secure a discount in the overall level of debt and provide two or more years to repay the debt. Depending on your circumstances 4R’s fee will be based on a successful outcome.
If you have other debts that are pressing or if creditors will not agree to ‘a time to pay arrangement’, then a formal insolvency solution would protect the company against aggressive legal recovery.
Formal Insolvency Protection
Formal insolvency processes such as Voluntary Arrangements either a Company Voluntary Arrangement or Individual Voluntary Arrangement and Pre Pack Administrations offer legal protection to the individual or company against legal recovery action such as Winding Up Petition or Bankruptcy Petition and County Court or High Court litigation and claims.
If a Voluntary Arrangement either a CVA (Company Voluntary Arrangement) or IVA (Individual Voluntary Arrangement) is appropriate then by notifying the other side of the proposed VA is normally sufficient to ensure they do not start legal proceedings such as a Winding Up Petition or Bankruptcy Petition. HMRC own policy is that once a Voluntary Arrangement is received they stop all legal recovery action until the outcome from the Voluntary Arrangement proposal is known. Common sense or a quick phone call will stop most creditors continuing legal action when a formal insolvency process is in progress.
If the matter is very urgent then we can seek an Administration Order from the High Court within 24 hours which protects the company from being wound up or other litigation for a period of time to allow for restructuring or other formal insolvency processes such a CVA, a Pre Pack Administration or Liquidation and Phoenix.
Top Tip
If you have received a Statutory Demand and agree that the debt is due but need to protect your business then the faster you take action the better. 4R can protect the value of a business and provide that protection fast to allow for a considered review of the business and agree on a resolution that works for all the stakeholders.
Get professional help now to independently assess the current situation and put you back in control. If in doubt, call us on 0800 0385 140 for advice.
Whatever your circumstances are 4R Business Recovery can and will be able to help you. Simply get in touch with an expert today on 0800 0385 140 to get free advice that will help you cancel out the stress of dealing with any issues you may be facing.