People often think that taking steps to recover a debt where the debtor can pay but won’t will be costly and time consuming. But it doesn’t always have to be that way. Recently there have been many successes where a Statutory Demand has been served on companies or individuals who owe money rather than issuing court proceedings.
Statutory Demands are usually quick and therefore inexpensive to prepare. They can be used if the debt exceeds £750, the debt is due and payable and not genuinely disputed, and no security has already been given. Once a Statutory Demand has been served on a debtor, and if it remains unsatisfied for 21 days, the creditor is entitled to issue a winding up or bankruptcy petition against the debtor. As long as the Demand has been filled in correctly, the debtor will have very limited scope to set the Demand aside.
If the Demand is genuinely disputed however, it can be costly. The risk is that the debtor will object to the Demand; an individual is entitled to apply for the Demand to be set aside and a company is entitled to apply for an injunction restraining the creditor from issuing a winding up petition or preventing the creditor from advertising the petition if it has already been issued. If the Court decides that there is a genuine dispute over the debt (and it only has to consider this question, not the merits of any dispute), the application will be successful and the creditor will usually be ordered to pay the debtors costs. However, the key is whether there is a genuine dispute, and evidence of one must be provided. If it is not, the application will fail.
There are risks in issuing Demands but, despite these, if a debtor is able but unwilling to pay a debt which is undisputedly due, they can be incredibly effective. The risks of personal insolvency to an individual can be daunting, some professionals cannot practice and individuals cannot act as company directors if they have been made bankrupt. If a winding up petition is issued against a company, this can be hugely problematic if the petition is advertised and others (for example banks, suppliers or customers) become aware of its existence.
Therefore, if you are owed money which is not genuinely disputed and you know they have the money, serving a Statutory Demand should be the first step you take in order to get paid.
For more information, email firstname.lastname@example.org.