Creditors may consider serving an statutory demand on the debtor when it is apparent that the debtor is dissatisfied by the delayed payment due to the debtor. Statutory demands are quick, efficient and cost-effective way to collect a debt to a debtor. If debts are over the PS750 threshold the statutory demand is usually used as the first stage in a winding up petition (against an entity) or bankruptcy request (against individuals).

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We are experienced Statutory Demand solicitors, and have decades of experience issuing and fighting Statutory Demands. Our team has extensive experience of submitting the statutory demand as well as negotiating with creditors and debtors and rescinding the statutory demands, and also issuing and defending winding-up petitions in a vigorous manner before the Royal Courts of Justice (Rolls Building) or at the relevant High Court District Registry or County Court with jurisdiction under the Insolvency Rules.

What is a legal demand?

A statute-bound demand is a request to pay the due amount within 21 days of being served on an individual in accordance to the provisions of. 268(1)(a) Insolvency Act 1986. It is a form of document that is that is served by a creditor to the debtor to show that the debtor is owed the amount specified that is more than PS750.

The first legal step in closing downa firm or making bankruptcy for an individual is to file an Statutory demand when the debt is more than PS750 or PS5,000, respectively. A statutory demand can be likely to be served at any time when the due date is. A process server is suggested to serve personal service. If a creditor is due money and needs the debt to be paid in a hurry seeking legal advice about serving a demand under the law is advised.

What is the length of time the statutory demand take?

Additionally the debtor may be served an order under the statutory system it is crucial that a specialist legal advice is sought as quickly as is possible, as you have only one year from date of service to request the Court’s approval to defer the demand under statutory law. If you do not apply within the prescribed timeframe the request to annul the statutory demand can be considered only at the discretion of the Court.

What are the requirements for serving an lawful demand?

The creditor should still adhere to the proper guidelines for service because a poor service can be fatal to the debt, even though the service of a statutory demand will not involve the court , with any court fees to pay.

This statutory demand drafted to be used in any further legal action against a debtor that ought to:

  • Provide the financial information of the claim along with interest calculations at the time of the demand
  • be served upon you the debtor in person (via processing server) or by mail; and
  • Tell the debtor what to do to meet the lawful demand, and to set it aside, and what the consequences are of doing neither.

What are the reasons a creditor should issue a statutory demand?

The benefits of executing a statutory demand are:

  • A statutory demand could be an efficient and cost-effective method of ensuring that the debtor pays for the amount owed rather than initiating court procedures (initially in the first instance anyway);
  • the statutory demand process will not require the Court and there aren’t additional court costs or delays in obtaining listings of applications (unless the debtor is able to contest the legal demand e.g. when the debt is in dispute);
  • A statutory demand commences the time limit for the debtor to pay its obligations, and once it is served on the debtor, he will have 21 days to settle the debt;
  • The demand can be a source of danger of declaring bankruptcy (or winding-up if served on a company) and can energise the thoughts of a person who is in debt to ensure that repayment of the amount is made promptly or incite participation in settlement talks.

What are the drawbacks of the creditor who is serving the legal demand?

A statutory demand may only be served only if the debt amount is at least PS5,000 (for the person).

A creditor has to consider continuing trade relationships and whether the issue of any statutory demands would alter its relations with the lender.

A creditor is not permitted to make a statutory demand on insolvent debt i.e. an unpaid debt that is an undetermined or indeterminate amount.

When the obligation is challenged with genuine reasons There are considerable risk to a debtor filing a statutory demand, because normal court proceedings will be the appropriate venue to resolve the dispute.

While (depending on the specifics of the situation) serving the statutory demand isn’t excessively costly (compared with litigation) however, when the debtor is not able to pay, it is the following step to file the debtor with a bankruptcy petition and increase the cost. There are rules specific to serving a statutory request and making a bankruptcy application and it is therefore essential to get legal advice from the very beginning. If an error is made during the process, it could delay or even stop the payment of the debt, as in addition to causing you to be responsible in the event of a debtor’s legal expenses when it comes to defense of the claim.

An easy step-by-step procedure for drafting an lawful demand

The structure of a statutory demand must be in accordance with the guidelines laid by the Insolvency Rules 2006.

In accordance with the rules of Rule 10.1 Insolvency Rules In accordance with Rule 10.1 of the Insolvency Rules for the content of the statutory demand are as in the following order:

  • that reads “Statutory demand under section 268(1) (debt payable immediately) of the Insolvency Act 1986” or “Statutory demand under section 268(2) (debt not immediately payable)”;
  • Provide the identity of the debtor.
  • includes the name and address of the creditor.
  • includes a description of the value of the debt (which must be greater than PS750) as well as the amount of consideration (or in the event that there is any consideration at all, the method that it is derived);
  • If the request is made pursuant to the section 268(1) and based upon a ruling or judgment of a judge or order, that date, order or judgment and the court from which it was obtained
  • If the demand is filed pursuant to section 268(2) and a list of the reasons that it is claimed that the debtor does not have no chance to pay the loan;
  • If the creditor has the right to the debt as a result of assignment, the details of the creditor’s original and any assignees who are intermediaries;
  • includes a clause that states that if the debtor fails to adhere to the terms of the demand, bankruptcy proceedings can be initiated;
  • specifies the deadline when the debtor has to adhere to the demand, in case the bankruptcy proceeding is to avoid.
  • A description of the means of compliance that are available to the debtor
  • A declaration that the debtor has the power to petition the court for the demand set aside
  • A statement that the rule 10.4(4) of the Insolvency (England and Wales) Rules 2016 states the court in which an application has to be made and also the name of the hearing center or court that is part of the County Court to which, in the current information the debtor is required to submit an application (i.e. it must be the High Court, the County Court at Central London or an appointed Hearing Centre of the County Court depending on what the situation could be);
  • A declaration that any application for a set-off of the debt must be filed within the period of 18 days from service on the debtor and
  • A statement that states that in the event that the debtor fails to request the set-off of the demand within 18 days , or else respond to the demands within 21 days following the date of service, the debtor may be declared bankrupt and his assets and property taken.

Template for statutory demand forms in Word format

A creditor can issue an statutory demand through the completion of each of the 4 standard demand forms for statutory purposes (Forms SD 1; SD 2; SD 3 or SD 4).

Three are the currently available demand forms for statutory demands that are available for download in Microsoft Word format. If you plan to utilize any of the forms, you must consult a lawyer to ensure that the correct format is used and the format is written properly. A mistake could lead to grave costs that may be more than the amount that is sought. There are other factors to be considered like the ability of the company or the individual, or if the debt is disputable or otherwise.

Notification: Any changes needed to be added to HMCTS the standard template form SD 2. It is vital that legal guidance is sought prior to the service of the statutory demand.

Demand for Immediate Payment of a debt from Limited company Statutory Demand in the section 123(1)(a) of the Insolvency Act 1986 Blank Statutory Demand Form (Form SD 1)

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