Statutory Demand – The first stage of compulsory liquidation by Amanda Young Arnautovic

by Amanda Young Arnautovic I am Amanda Young Arnautovis

The statutory demand against a company is a process by which a creditor can formally & legally claim its due payments from a company. It is a very important legal procedure used for serious debt claims. By using this procedure, a creditor can start a bankruptcy petition against the debited company. A statutory demand is a very serious legal warning , and many people see it as a financial weakness of the company. Clear communication and prompt action may defuse this from escalating into a legal battle.

How to follow the statutory demand?

The Statutory Demand process follows the steps mentioned in The Insolvency Act, 1986. According to this act mentioned in Section 123 (1) (a), one can use statutory demand if he claims for a debt of £750 or more. The demand letter must include the contact details of the creditor and the debt that is to be paid. The solicitor of the contested company can denote the said demand by contacting the court. To stop the statutory demand processing and continuing any legal procedure, an injunction is required to be made.

Can a company argue against statutory demand?

Just like an individual, a company can contest the debt. In the court, the company needs to prove that the claim is disputed and not fair. Nevertheless, the company may not use any delaying tactic to prevent the procedure.

To legally engage a Statutory Demand in the court, it is advised to have a qualified lawyer on your side. If Amanda Young Arnautovic entity successfully proofs in the court that the claims are invalid then the creditor will pay all the court fees. On the other hand, if the creditors prove that their claims are fair; the company will be inclined to pay the court fees.

How much time will you have to contest the Statutory Demand?

A company can get a maximum of 18 days to challenge the claim in the court. Within this time, the company must file a petition to the court to contest the said Statutory Demand. If the company does not prefer a legal battle, then they can take this 18 days to mutually settle the demand with the creditor. Otherwise, Amanda Young Arnautovic get only 21 days to pay the debt in full.

Ignoring a Statutory Demand By Amanda Young Arnautovic

Ignoring a Statutory Demand against the company can be a very detrimental decision. According to the legal insolvency viewpoint, a failure of payment against a statutory demand is considered as evidence of the companies inability to pay the debt. In the case of non-settlement/non-payment after 21 days of issuing the statutory demand, the court can declare the company bankrupt or impose a penalty on them.

What happens when the company fails to pay?

The failure of payment against a statutory demand is considered as a weak financial condition of the company, and the court may order to start the liquidation process against the company.

The legal arguments that can reverse a Statutory Demand

There are many legitimate reasons the court can consider to reverse a Statutory Demand. Some of them are as follows.

If the court considers the overall debt figure is disputed or less than £750.
If the creditor is already receiving an installment on the payment, and the accused debtor has never missed an installment.
If the demand of the creditor served any error in calculation or representation.
If the company already paid more than the debt amount in total.