Creditors often consider serving a statutory demand upon a debtor when the creditor is frustrated with delayed payment from the debtor. Statutory demands can be a relatively speedy, impactful and cost effective means to extract sums owed from a defaulting party. In circumstances where a debt is over the £750 threshold, a statutory demand is often used as the first step to a winding up petition (against a company) or a bankruptcy petition (against an individual).
We are expert Statutory Demand solicitors and have years of experience at both issuing and defending statutory demands. Our team have unparalleled experience at serving statutory demands, negotiating with debtors/creditors, setting aside statutory demands and both issuing and defending winding up petitions vigorously at the Royal Courts of Justice (Rolls Building), or the relevant High Court District Registry or County Court with jurisdiction under the Insolvency Rules.
What is a statutory demand?
A statutory demand is a demand for payment of a debt within 21 days served upon an individual in accordance with s. 268(1)(a) Insolvency Act 1986. It is a document served by a creditor upon a debtor that is intended to prove that the debtor owes the specified sum of money which is over £750.
The first legal step to winding up a company or making an individual bankrupt is a statutory demand if the debt is for more than £750 or £5,000 respectively. A statutory demand is capable of being served as soon as the debt is due. A process server is recommended for personal service. If a creditor is owed money and wants the debt paid quickly, taking legal advice on serving a statutory demand is recommended.
What are the rules of service of a statutory demand?
A creditor must still follow the correct rules of service, as incorrect service could be fatal to the debt claim even though serving a statutory demand does not involve the court with no court fees payable.
The statutory demand is intended to be relied upon in further legal proceedings against a debtor and which ought to:
- give financial details of the claim, along with interest calculated to the date of the demand;
- be served on you the debtor personally (via process server) or by post; and
- tell the debtor what to do to comply with the statutory demand, have it set aside and the consequences of doing neither.
Why should a creditor serve a statutory demand?
The advantages of serving a statutory demand include:
- a statutory demand can be a more cost-effective and speedier method to ensure the debtor pays the debt rather than instigating court proceedings (initially anyway);
- the statutory demand process does not involve the Court, there are no added court fees or delays seeking listings of applications (unless the debtor challenges the statutory demand e.g. if the debt is disputed);
- a statutory demand starts the time running for a debtor to honour its debts, as once served, the debtor has 21 days within which to pay the debt;
- the demand carries a threat of bankruptcy (or winding-up if served upon a company), and could focus the mind of a debtor to ensure re-payment of the sums is expedited or encourage engagement in settlement negotiations.
A step-by-step guide to drafting a statutory demand
The format of a statutory demand must follow the guidelines set out in the Insolvency Rules 2006.
Following Rule 10.1 Insolvency Rules 2016, the contents of a statutory demand are as follows:
- headed either “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)”;
- provide identity details for the debtor;
- has the name and address of the creditor;
- contains a statement of the amount of the debt (which must be over £750), 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 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;
- has a statement that if the debtor does not comply with the demand bankruptcy proceedings may be commenced;
- provides 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 the present information, the debtor 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; and
- 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.
Template statutory demand forms in Word format
A creditor issues a statutory demand by completing one of the four template statutory demand forms (Forms SD 1; SD 2; SD 3 or SD 4).
The following are the three current blank statutory demand forms which can be downloaded Microsoft Word format. If it is your intention to use one of these forms you should take expert legal advice to ensure the correct form is used and that the form is set out correctly. Any mistakes may result in serious costs consequences which may exceed the amount of debt sought. There are also other considerations such as the solvency of the company or individual, and whether the debt is disputed in any way.
Note: amendments made need to be made to HMCTS’ standard template Form SD 2, therefore it is crucial that legal advice is sought before serving a statutory demand.
Demand Immediate Payment of a Debt from a Limited Company Statutory Demand under section 123(1)(a) of the Insolvency Act 1986 Blank Statutory Demand Form (Form SD 1)
Debt for Liquidated Sum Payable Immediately
Statutory Demand under section 268(1)(a) of the Insolvency Act 1986
Blank Statutory Demand Form (Form SD 2)
Debt for liquidated sum payable immediately following a judgment or order of the court
Statutory demand under section 268(1)(a) of the Insolvency Act 1986
Blank Statutory Demand Form (Form SD 4)
Debt payable at future date
Statutory demand under section 268(1)(a) of the Insolvency Act 1986
Blank Statutory Demand (Form SD 3)
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Specialist statutory demand lawyers
We are expert Statutory Demand solicitors and have years of experience at both issuing and defending statutory demands. We are a specialist City of London law firm made up of Solicitors & Barristers and based in the Middle Temple Inns of Court adjacent to the Royal Courts of Justice. We are experts in dealing with matters surrounding insolvency in particular issues. Our team have unparalleled experience at serving statutory demands, negotiating with debtors/creditors, setting aside statutory demands and both issuing and defending winding up petitions vigorously at the Royal Courts of Justice (Rolls Building), or the relevant High Court District Registry or County Court with jurisdiction under the Insolvency Rules.