If you have received a statutory demand and do not agree with the debt in full, it is important to understand how to respond to a statutory demand before the creditor takes further legal action.

The correct way to respond to a statutory demand depends on whether the demand has been served on you personally or on your limited company. The legal procedures for challenging a personal statutory demand and opposing a company statutory demand are different.

If you dispute the amount claimed, believe the debt is not owed or have a genuine counterclaim or set-off, you should obtain legal advice immediately. Responding to a statutory demand incorrectly or missing the relevant deadline could put you at risk of bankruptcy proceedings or a winding-up petition.

How to Respond to a Personal Statutory Demand

If you have received a statutory demand in your personal name and do not agree with the debt, you may be able to apply to the court to set aside the statutory demand.

An application to set aside a personal statutory demand must be made using the appropriate court forms and supported by evidence explaining why the demand should be set aside.

Possible grounds for challenging a personal statutory demand include:

• The debt is genuinely disputed on substantial grounds.

• You have a valid counterclaim, set-off or cross-demand.

• The amount claimed is incorrect or the debt is not legally due.

• There is another recognised legal ground for setting aside the statutory demand.

The application must be made within the applicable time limit. For a personal statutory demand, the usual period is 18 days from service, but you should check the applicable rules and obtain advice immediately.

If the debt has already been established by a County Court Judgment, your options may be more limited and will depend on the circumstances, including whether the judgment remains enforceable and whether there are grounds to challenge it.

How to Respond to a Statutory Demand Against a Limited Company

If your limited company has received a statutory demand and does not agree with the debt, the procedure is different from the procedure for an individual.

A company statutory demand is not normally challenged by applying to set it aside using the personal statutory demand procedure. Where a creditor threatens to present a winding-up petition based on a disputed debt, the company may need to consider applying to the High Court for an injunction to restrain presentation of the petition.

An injunction application must be supported by appropriate evidence explaining why the creditor should be prevented from proceeding. The court will consider whether there are substantial grounds for disputing the debt or another recognised legal basis for granting the injunction.

Depending on the circumstances, the application may require:

• The appropriate court application.

• A supporting witness statement.

• Copies of relevant contracts, invoices and correspondence.

• Evidence explaining why the debt is disputed.

• Supporting financial information where relevant.

• Payment of the applicable court fee.

The correct application, court procedure and fee must be checked before filing. An injunction is not automatically granted simply because a company disputes a statutory demand.

What Happens If You Do Not Respond to a Statutory Demand?

If you ignore a statutory demand, the creditor may be able to take further insolvency action if the legal requirements are satisfied.

For an individual, this may include presenting a bankruptcy petition.

For a limited company, the creditor may be able to present a winding-up petition based on the company’s inability to pay its debts.

A winding-up petition can have serious consequences for a company, including disruption to banking facilities and the risk of compulsory liquidation. If a petition has already been presented, urgent advice may be required about whether an injunction to restrain advertisement is appropriate.

If you do not agree with a statutory demand, do not assume that ignoring it will prevent the creditor from taking action. You should obtain advice about the available options and any applicable deadlines.

Can You Stop a Creditor From Presenting a Bankruptcy or Winding-Up Petition?

In appropriate circumstances, it may be possible to take legal action to prevent a creditor from proceeding.

For a personal statutory demand, an application to set aside the demand may be available where the relevant legal grounds are established.

For a statutory demand against a limited company, an injunction may be available to restrain presentation of a winding-up petition where the legal requirements are met.

The evidence required will depend on the circumstances of the debt and the proceedings. A genuine dispute supported by relevant documents may be important, but the court will assess the application under the applicable legal principles.

How Nigel Can Help You Respond to a Statutory Demand

If you have received a statutory demand and do not agree with the debt in full, Nigel can assist you in understanding the appropriate procedure and preparing the relevant application, subject to the services available.

Assistance may include:

• Reviewing the statutory demand and the amount claimed.

• Assessing whether there are grounds to challenge the debt.

• Advising on an application to set aside a personal statutory demand.

• Advising on an injunction against a winding-up petition involving a limited company.

• Helping prepare the application and supporting evidence.

• Explaining the relevant court procedure and deadlines.

Using the correct procedure is essential. An incorrectly completed application or an application made to the wrong court may be rejected or delayed.

Contact Nigel for Help Responding to a Statutory Demand

If you have received a statutory demand and do not agree with the debt, contact Nigel as soon as possible.

Whether the statutory demand is against you personally or your limited company, the correct response depends on your circumstances, the evidence available and the stage of any insolvency proceedings.

Early advice can help you understand whether an application to set aside a personal statutory demand or an injunction relating to a company statutory demand may be appropriate.

Contact Nigel today for advice on how to respond to a statutory demand and the steps available to challenge a debt before further insolvency proceedings are commenced.