What is statutory demand?
A statutory demand is a formal demand (on a set form) for an unpaid debt from an individual or a company, where the sum owed is over £5,000 for an individual (having been increased from £750 in October 2015) or £750 for company and the debt is no older than 6 years.
Why use a statutory demand?
It is a powerful tool as the consequences of failing to respond within the specified 21 days could lead to bankruptcy or winding up of the company, but this must be done within 4 months of the statutory demand. It is a simple and cheap step to take which requires no legal or court intervention initially.
Although on the face of it a simple task, it is easy to get the mechanics wrong and caution should be exercised when doing this yourself.
Using the right form
New forms were introduced by the Insolvency (England and Wales) Rules 2016 which came into force on 6th April 2017
You can download them from this link. There are 4 different forms.
However, you should be aware that there is an error in Part A of form SD2 (statutory demand for a liquidated sum payable immediately) where the old rule is referred to. The correct wording is contained in Part A of form SD3.
Serving the form on the debtor
It is vital that the statutory demand is ‘served’ on the debtor in the prescribed way and that you have proof of this, as it will be relevant in calculating time for when the 21 days expires.
Even law firms can get this wrong
The Law Gazette recently reported on how Irwin Mitchell’s application for a bankruptcy petition against a client was dismissed as they served the statutory demand at the wrong place and therefore could not show that service had in fact been effected
If you are the recipient of a statutory demand do not be tempted to ignore this – seek advice. You only have 18 days in which to make an application to set it aside or be faced with potential bankruptcy or winding up.