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The first stage of the insolvency law process for individuals and sole traders involves drafting and serving a statutory demand. The amount of the debt you are seeking to recover must be at least £5,000.00 and the debt must be undisputed.
WHAT IS A STATUTORY DEMAND?
A statutory demand is a written demand for payment of a debt within 21 days. The demand is a formal allegation of insolvency issued pursuant to Section 268 of the Insolvency Act 1986 and there are 3 different versions depending upon the stage at which the debt is at:
- A statutory demand under Section 268(1)(a) of the Insolvency Act 1986 for a liquidated sum payable immediately.
- A statutory demand under Section 268(1)(a) of the Insolvency Act 1986 for a liquidated sum payable immediately following a judgment or an order of the court.
- A statutory demand under Section 268(2) of the Insolvency Act 1986 for a debt payable at a future date.
HOW IS A STATUTORY DEMAND DIFFERENT TO A PRE-WINDING UP LETTER?
A statutory demand is different to a pre-winding up letter in that it is the appropriate written demand for payment where you are owed money by an individual or a sole trader and wish to make that person bankrupt.
WHAT INFORMATION SHOULD BE INCLUDED IN A STATUTORY DEMAND?
A statutory demand must be in a prescribed form. Pursuant to Rule 10.1 of The Insolvency (England and Wales) Rules 2016, a statutory demand under Section 268 of the Insolvency Act 1986 must include the following information:
- The heading ‘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)’.
- Identification details of the debtor.
- The name and address of the creditor.
- A statement of the amount of the debt and the consideration for it (or, if there is no consideration, the way in which it arises).
- If the demand is made under Section 268(1) and founded on a judgment or order of a court, the date of the judgment or order and the court in which it it was obtained.
- If the demand is made under Section 268(2), a statement of the grounds on which it is alleged that the debtor appears to have no reasonable prospect of paying the debt.
- If the creditor is entitled to the debt by way of assignment, details of the original creditor and any intermediary assignees.
- A statement that if the debtor does not comply with the demand bankruptcy proceedings may be commenced.
- The date by which the debtor must comply with the demand, if bankruptcy proceedings are to be avoided.
- A statement of the methods of compliance which are open to the debtor.
- A statement that the debtor has the right to apply to the court to have the demand set aside.
- A statement that Rule 10.4(4) of the Insolvency (England and Wales) Rules 2016 states to which court such an application must be made; and name the court or hearing centre of the County Court to which, according to present information, the debt must make the application (i.e. the High Court, the County Court at Central London or a named hearing centre of the County Court as the case may be).
- A statement that any application to set aside the demand must be made within 18 days of service on the debtor.
- A statement that if the debtor does not apply to set aside the demand within 18 days or otherwise deal with this demand within 21 days after its service the debtor could be made bankrupt and the debtor’s property and goods taken away.
Copies of the relevant forms can be viewed at www.gov.uk/statutory-demands.
Where appropriate, we will also add statutory late payment compensation to the debt you are owed, pursuant to the Late Payment of Commercial Debts Regulations 2002, as amended by the Late Payment of Commercial Debts Regulations 2013.
HOW DO YOU SERVE A STATUTORY DEMAND?
A statutory demand must be served on a debtor. In practice, this means that it must be delivered by a process server, who is a professional engaged in the business of bringing legal documents to the attention of a litigant. Rule 10.2 of The Insolvency (England and Wales) Rules 2016 states “A creditor must do all that is reasonable to bring the statutory demand to the debtor’s attention and, if practicable in the particular circumstances, serve the demand personally”. Personal service means handing the document to the prospective litigant or pushing it through the letterbox if the litigant is not available. A process server will usually produce a witness statement or an affidavit following service of a statutory demand.
DO I NEED A SOLICITOR TO SERVE A STATUTORY DEMAND?
No. However, a solicitor will be able to advise you if a statutory demand is appropriate, draft it on your behalf and arrange for it to be served on the individual or sole trader that owes you money.
HOW MUCH DOES IT COST TO SERVE A STATUTORY DEMAND?
For a fixed fee of £500.00 plus VAT and a process server’s fee of £100.00 plus VAT, we will draft and serve a statutory demand on your behalf.
HOW DO I INSTRUCT YOU TO SERVE A STATUTORY DEMAND?
You can instruct us to serve a statutory demand by completing our Statutory Demand Form – Individuals & Sole Traders and returning it to: [email protected]. Prior to doing this, you must complete the Open an Account Form on our website and wait for confirmation that your account has been opened.
WHAT WILL HAPPEN AFTER I INSTRUCT YOU TO SERVE A STATUTORY DEMAND?
We will send you a copy of our statutory demand and our invoice for £200.00 plus VAT and the process server fee of £100.00 plus VAT. Thereafter, if the individual that owes you money contacts us following receipt of our statutory demand, we will contact you immediately to let you know if:
- They admit the debt and have sent us payment.
- The admit the debt and have not sent us payment.
- They admit part of the debt and have sent us payment.
- The admit part of the debt but have not sent us payment.
- They admit the statutory late payment compensation and have sent us payment.
- They admit the statutory late payment compensation but have not sent us payment.
- They have requested copy documents.
- They dispute the debt and have made application for the statutory demand to be set aside.
- They dispute the debt but have not made application for the statutory demand to be set aside.
- They dispute the statutory late payment compensation.
If the individual that owes you money fails to respond our statutory demand, you will be entitled to proceed to Stage 2 of the insolvency law process by instructing us to issue a bankruptcy petition.
Please note: to access our services, you will need to open an account. You can do this by completing the form on the open an account page of our website. On receipt of your application, we will set you up as a debt recovery client and then contact you to explain what will happen next. Alternatively, for general enquiries, please contact us. If you would like to speak to one of our advisors, please call: 0151 650 6908. We very much look forward to working with you.