What is a Statutory Demand?

A statute of demand is a letter sent by a creditor to the debtor. It indicates that the creditor will start making an effort to make the debtor insolvent until the debt is paid in full or an arrangement has been agreed to pay in installments.

Statutory demands aren’t an option for debt recovery however, they are often (mis)used as they are. When properly used in the right way, a statutory demand serves as an opportunity to show the fact that an individual, or firm is not able to meet their obligations when they are due and is therefore insolvent.

The proof of insolvency is essential when a creditor is seeking to file a petition for an person’s bankruptcy, or the company’s winding-up. In the wrong way, the statutory demand isn’t intended to be used for an option for debt recovery could cause a substantial loss to creditors if the demand is not disputed.

If the creditor issues an official demand to pay the debt that is disputable or refuses to release it in the event that there is a dispute after the demand is served or served, the creditor could be required to cover the debtor’s legal expenses to set aside the demand made by law against an individual, or to obtain an injunction to stop the filing of a winding-up demand from the debtor.

The cost incurred by the creditor upon the setting aside or decision to grant an injunction may vary from PS2k to upwards when, in the end the debt remains due. It is crucial for the creditor to realize that the decision to withdraw your demand doesn’t mean acknowledgment that the debtor is not have to make payments, but is simply a declaration that there exists a real dispute or triable matter for the judge to decide.

There is no need to waste time and money to defend an request of a temporary set-off, or an injunction against the presenting and/or publicizing a petition when there is a real dispute. The creditor will be better off putting its time and resources to follow the procedure for pre-action and, if needed to issue legal proceedings.

Another issue What happens in the event that the demand isn’t rejected and there is no dispute brought up? The next step for the creditor will be to start formal insolvency proceedings, by filing the bankruptcy petition or winding-up petition. This will be at least PS2,000, and the creditor must part any net assets remaining after secured creditors have been paid and the cost of insolvency with all other creditors. contact-us here

The Do’s and Don’ts of Statutory Demands

What Should I Do If I Have Been Served With a Statutory Demand?

Statutory demands are typically delivered by personal service to the debtor, as the creditor must prove that the demand came to the attention of the debtor.

If you’re given a request:

Do Act Quickly and Consult an Experienced Solicitor Immediately

If an appropriate statutory demand has been issued to individuals and you do not meet it within 21 days or if you disagree with the request and it’s not annulled by the court based on an application filed by you within 18 days it could trigger your bankruptcy. If you’re an unincorporated company and haven’t filed for an injunction to stop the lender from submitting the winding-up petition, then an unsatisfied demand may cause the winding up of the business. In both cases , the creditor has to prove that an undisputed and unsecure debt of no less than PS750 for a corporation or at least PS5 for individuals are due within 21 days of the receipt on the request.

Don’t Ignore It

Particularly if you contest the debt or have a setoff or counterclaim to the amount requested. Contact the creditor, and lay out your reasons for disputing your demand on paper, and request that they withdraw the demand. If, however, the amount of PS750 for businesses and over PS5,000 for individuals in the demand remain not disputed or unpaid, then it is an act of insolvency or evidence of inability to pay off debts as they become due. The demand could be relied upon by the creditor during insolvency actions against you. Most creditors will use the lawful demand to recover debts as a tool , and do not wish to spend the expense of filing for bankruptcy or winding-up if the debtor isn’t able to pay. These costs to the creditor could be in thousands, and they will not be recouped by the creditor in the event that the debtor truly is insolvent on the balance sheet. If the debtor does not accept to withdraw their demand through writing, then

Do Apply To The Court To Set Aside The Demand Within 18 Days

In the event that you’re an adult. The lawful demand must specify the proper court to submit your application to. If you’re a corporation and the demand or threat of presenting an application will not be cancelled the company must file for an injunction to stop an individual from making a winding down petition. Be aware that a statutory demand does not necessarily required prior to the time a creditor is able to present an application for winding up. In the case of individuals, the court is able to annul the demand based on the following reasons:

  1. the debtor may have an undisputed counterclaim, set-off, or cross-demand that equals, surpasses or reduces the debt or the debts listed in the demand statutory up to the limit of less than PS5,000 or
    the debt is challenged because of reasons that appear to the judge to be substantial, or substantial. This reduces the size of the debts in the statute demand to PS5,000 or lower or
    It appears that the creditor has some security with respect to the debt that is claimed in the demand. Either the statute-based provisions regarding information about the kind and value of the debt aren’t observed in relation to it or the court is satisfied that value of the security is equal or exceeds the total value of the loanor
  2. The court is satisfied on other grounds to decide that the demand needs to be thrown out.
    For businesses, and when submitting an request for an injunction the court will decide in addition to that what is the real disagreement over the amount demanded or if there is a cross-claim or set-off, if the creditor has a different method to get the money back and if it is unreasonable or unfair for the company to wind up.

If the debtor succeeds in its request to defer an order of statutory nature or to get an injunction to stop the filing of a winding up petition, it is nearly likely that the judge will require the creditor to reimburse the debtor’s legal expenses. In the event of a case, these expenses can be anywhere from PS1,000 up to 10,000 dollars. The debtor may discover that they are not able to pay for these legal expenses, even if they’re reimbursed by the lender. It could have the potential for the debtors to find an attorney who can represent them under a no-win-no-fee arrangement.



  • Make sure you act quickly to avoid missing the deadline
  • Find a lawyer with expertise in handling legal requirements
  • Ask for a no win no fee

What Should I Do If I Want To Serve a Statutory Demand?

A creditor that serves an order under the law for a debt that is disputed takes on an enormous risk with regards to costs when they don’t take it off when the debtor is involved in an issue or a defense.

Do not think about making a statutory demand in lieu of a court order unless the debt is not disputed. Statutory demand are not intended to be employed as a tool for debt collection. Many creditors actually use them in this way.

Be aware that if a creditor continues with a statutory demand , and the debtor receives the demand withdrawn or an injunction to stop the submission of a winding up petition, then the court could punish the debtor with expenses even if the creditor succeeds in winning the dispute or counterclaim in normal court.

Above all, consult an attorney from Law before serving a demand.

What Happens After Statutory Demand?

Once the statutory demand been delivered to the creditor, the latter is entitled to file for a bankruptcy judgment against an individual or to file a winding up petition against a business after 21 days. Anyone who receives a statutory demand has to respond to that demand within the period of 18 days or the risk of a petition being filed. If the debt is in dispute, it is generally appropriate to ask that the debtor accept to stop or withdraw the demand under statutory law.

If there is an agreement that is not reached, then the creditor must apply to the court to obtain an order (and the costs) for the revocation of the demand made by law. If it is a business, first the company must request commitments that the creditor won’t issue or publicize an application, failing which the business will have to get an injunction order by the court that prohibits the creditor from releasing an application or advertising a petition. 

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