How to set aside a Statutory Demand

March 1, 2022 / Business Insolvency

A statutory demand refers to a formal demand for payment that should not go ignored.

If your company has been issued a statutory demand it is important to act quickly.

If you want to learn more about what steps to take next and how to set aside a statutory demand, Clarke Bell has put together this guide outlining everything directors need to know.

What is a statutory demand?

As we have already mentioned, a statutory demand is a formal demand for payment and as such plays a powerful role in the debt recovery process.

A statutory demand is typically a final resort for the creditor to try and get back the money they are owed. As such, a statutory demand will often be followed by a winding-up petition.

What is the criteria for issuing a statutory demand?

There are several criteria that must be met for a statutory demand to be issued.

These include:

  • The creditor must be owed a sum of £750 or more. This amount must not be in dispute.
  • A creditor has to be able to show that the statutory demand has been served in the correct and proper way
  • The creditor cannot have security over assets to the value of the debt or more
  • The money owed to the creditor must not be part of an existing payment agreement
  • The creditor must issue the demand using the correct forms
  • The creditor must not owe the company money

What options are open to me if I am issued a statutory demand?

If you have been issued with a statutory demand then you will need to act quickly to have the best chances of dealing with the situation in the best way. It is important that you seek professional advice as soon as possible for guidance on how best to proceed and to fully understand the options open to you.

There will generally be a number of options available to you.

Pay back the amount owed

The first option will be to pay back the debt in full.

Here, the director has just 21 days since the demand was issued in order to pay back the amount. Upon payment of the debt, the statutory demand will be written off.

Agree on a repayment plan

If repaying the debt in full is not a viable option under the circumstances, another option is to enter into a repayment plan.

This can either be an informal agreement between the director and creditor. Or a formal agreement can be drawn up – such as a Company Voluntary Arrangement (CVA).

Close the company

Another option is to close the company through a Creditors’ Voluntary Liquidation (CVL).

This is usually the best option for companies that do not have a viable future and can’t be rescued. This is also a way for company directors to close a company in a way that fulfils their directors’ duties.

The CVL process results in a company being formally liquidated in a way that meets the directors’ duties to its creditors. Through the process, the company’s assets and liabilities are correctly dealt with before the company is closed and finally dissolved, being removed from the Companies House register.

If you’d like to learn more about Creditors’ Voluntary Liquidation, and why a company would need to go through this process, check out our handy guide.

Set aside the statutory demand

Another option is to set aside the statutory demand, meaning it will be cancelled by the courts.

If a director believes they have genuine grounds to set aside the statutory demand, it is important that they know how.

A statutory demand can be set aside if it can be proven that it was not issued correctly. This is because a statutory demand must be issued in the correct way for it to be valid.

A statutory demand can be set aside if:

  • The creditor has not correctly filled out the Statutory Demand form 4.1
  • The creditor has not delivered the statutory demand to the company’s registered address
  • The statutory demand was not signed for by an officer of the business

If any of these criteria are met, there are grounds to dispute the statutory demand and have it set aside.

The director can also request that the statutory demand is set aside if they disagree with the existence of the debt or the amount of debt it is claimed they owe.

Get the help of Clarke Bell today

A company that has been issued with a statutory demand must act quickly. You will have just 21 days to act. Failing to act may lead to the forced liquidation of your company.

If your company has been issued a statutory demand and you want to know what steps to take next, whether that is to set aside the statutory demand, or look at options such as a CVL, Clarke Bell can help you.

We have a team of friendly experts who have worked on cases of all kinds across the country. Get in touch to see how we can help your business today.