Statutory Demand

[Novec]

My Company has been served a Statutory Demand by Debt collectors chaseing a debt for an invoice that we contest in every way. I cannot apply to set aside the Statutory Demand as we are a Ltd company. What should I do to protect us from this action and what is lightly to happen next? The Statutory Demand runs out in 5 days.

[Oneeyedvic]

Can you say why you cannot have the S D set aside - surely the Ltd company is the debtor and any officer of the compnay (director or co. sec) should be able to get this set aside.

 

[Maud]

A statutory demand requires that the debtor either:
Pays the relevant amount
Offers to secure it against property
Offers to repay the debt in a way that is satisfactory to the creditor., perhaps by instalments.

Some creditors use statutory demands as a way of persuading debtors to pay off the debt, usually by borrowing elsewhere.

Statutory demands are very serious. After 21 days the creditor can petition for a bankruptcy order. Therefore, it is usually worth contacting the creditor by telephone and asking them what their next step will be.

Ignoring a statutory demand may encourage the creditor to petition for bankruptcy. It is worth bearing this in mind, particularly if you are contemplating petitioning for your own bankruptcy.

If you want to avoid bankruptcy you should consider:

Making payment(s) to reduce the debt to less than �750; or

Making an offer to pay by instalments; or

Making an offer of a reduced amount in settlement of the debt; or

Applying to have the statutory demand set aside

[Maud]

21 days after the serving of the statutory demand, the creditor can petition for the debtor's bankruptcy unless it has been 'set aside'.

An application to set aside the statutory demand can be made if:

There is a substantial dispute about the money owed;

There is a counterclaim of more than the money owed;

The creditor holds security that equals or exceeds the debt in value;

On 'Other Grounds'. Though not defined, these can include:

The demand was issued in error, e.g. for a secured debt or for an amount of less than �750;

Execution has been stayed on a judgement;

The debtor is complying with an instalment order (so the debt is not strictly due); and

The creditor failed to comply with the rules and prejudiced the debtor in the process;

An application to set aside must be made within 18 days of the statutory demand being served. Forms 6.4 (application) and 6.5 (affidavit) must be completed and taken to the court. However, the court can dismiss the application if there are no grounds.

If there are grounds, a hearing will be arranged at which the court will decide whether the demand will be set aside.

If the debt falls under the Consumer Credit Act 1974, the court should also consider if any relief is available to the debtor under the Act. This would include a time order application

[Novec]

Thankyou Maud but I do not wish to pay this as it is against an invoice that has not had the work completed, I have not been to court and I can't apply to set it aside as we are Ltd. I can't believe that I am forced to pay it just because a debt collector files an SD against me. Do you know how I protect my company?

[Maud]

An originating application is the method for a limited company to set aside a SD where there is (a) a genuine dispute about the debt, and/or (b) an offsetting claim. The debtor Ltd Co must file an affadavit in support of an originating application within 21 days of service of the SD. It is necessary to show a genuine dispute which can be categorised as a "plausible contention requiring investigation" and/or a "serious question to be tried". The threshold is low and a debtor Ltd Co will more often than not succeed in showing a genuine dispute. You are obviously not used to dealing with these things yourself and therefore I have to say that you should urgently employ a solicitor.

[Hgrove]

The following may be of interest to you. From Farrar's Company Law, 4th ed., p. 411:- If the debt is due and is undisputed the petition will proceed to hearing and adjudication in the normal way but it is an abuse of process to present a winding-up petition under this heading (sec. 123 Insolvency Act 1986) if the debt is bona fide disputed (as you say it is) and the petition is being used as a means of pressurising the company. (That is a petition to wind up after you have failed to pay the debt or to secure or compound it to the reasonable satisfaction of the creditor, within 21 days of the Statutory Demand). In such a case the petition will be dismissed; or the creditor can be restrained by injunction from presenting a petition. However, this long-established approach of dismissing the petition where the debt is bona fide disputed is a rule of practice only, and it must give way to circumstances which make it desirable that the petitioner should proceed.  Thus the petition will not be dismissed if the petitioning creditor has a good arguable case that he is a creditor and the effect of the dismissal would be to deprive the petitioner of a remedy or otherwise injustice would result or for some other sufficient reason the petition should proceed. Having grounds for the presentation of a petition does not necessarily entitle the creditor to the making of a winding-up order.

Hope it helps but as Maud says, you do need to get a solicitor to act for you.

[Maud]

If you click this link you will find a discussion on winding up a company which may have something of interest

http://www.theanswerbank.co.uk/Money_and_Finance/ Question69381.html

[Maud]

The matters of the Hgrove answer are not for now, but might be considered (along with many other equal or more important things) later by your legal team if there is a trial. Your immediate urgency is that if you do not enter a set aside application with affadavit by Tuesday you will be trapped into an embarrassing, time consuming and very wastefully expensive and seemingly never ending rigmarole - it will not go away of its own accord. Your choices are (a) to ignore it and hope that your opponent will not want to lay out �800 on Wednesday to wind your company up (only you can judge how likely or unlikely this is and whether or not you can afford to gamble your company on your judgement) (b) to pay up by Tuesday and so avoid what will be not less than �2000 in costs if you wait until, say, Thursday. After that the costs start to increase in ever larger amounts, or to (c) enter an application to set aside the SD together with an affadavit by Tuesday. You should have put the application alone in within 18 days, but you still stand a good chance of getting away with it if you phone Court Services on Monday and tell them what you are doing (confirm by fax). It is quite a quick job for a solicitor to drum up a few words for a holding defence and affadavit on Monday, but you will have to start phoning around first thing to find someone with time to do it.

[Didwot]

Why ask us? You need to see your company lawyers and fast. . It is a strange fact that there is a set proceedure for individuals to apply to set aside Bankruptcy Stat Demands, but no correlating provision for Companies and winding up SDs. Maud is mostly right. You can apply to the Court for an order restraining the presentation of the Winding up Petitiion. If a petition is presented then you can apply to the court to have the advertising of the petition restrained. If the petition is advertised your company is most ways up the creek.