If you have received a statutory demand and dispute the debt, you may be able to apply to the court to set aside a statutory demand. Setting aside a statutory demand is a legal procedure available to individuals in appropriate circumstances where there are grounds to challenge the demand.

It is important to understand that the process for setting aside a statutory demand against an individual is different from the process for challenging a statutory demand served on a limited company.

If you have received a statutory demand personally, you should act immediately. There are strict time limits for making an application to set aside a statutory demand, and failing to take the correct steps could expose you to bankruptcy proceedings.

If the statutory demand has been served on your limited company, the appropriate procedure may instead involve applying for an injunction to restrain the presentation of a winding-up petition.

What Does It Mean to Set Aside a Statutory Demand?

To set aside a statutory demand means to ask the court to cancel the demand because there are legally recognised grounds for doing so.

A statutory demand is a formal demand for payment of a debt. If an individual receives a statutory demand and fails to respond within the applicable period, the creditor may be able to use it as part of the process of pursuing bankruptcy proceedings.

However, a statutory demand does not automatically mean that you will become bankrupt. If you dispute the debt or believe the demand should not have been served, you may have grounds to apply to set aside the statutory demand.

The court will consider the evidence and the applicable legal requirements before deciding whether the statutory demand should be set aside.

Who Can Apply to Set Aside a Statutory Demand?

The statutory demand set-aside procedure generally applies to individuals who have received a personal statutory demand.

If you have received a statutory demand in your own name, you may be able to apply to set aside the demand where there are grounds recognised by the Insolvency Rules 2016.

If a limited company has received a statutory demand, the procedure is different. A company does not normally use the personal statutory demand set-aside procedure. Where a creditor threatens to present a winding-up petition based on a disputed debt, the company may need to apply for an injunction to restrain presentation of the petition.

Before starting a statutory demand application, it is essential to establish whether the demand is against you personally or against a limited company.

What Are the Grounds for Setting Aside a Statutory Demand?

There are several grounds on which an individual may be able to apply to set aside a statutory demand. The appropriate grounds depend on the circumstances of the debt and the evidence available.

1. The Debt Is Genuinely Disputed

If you genuinely dispute the debt on substantial grounds, you may be able to apply to set aside the statutory demand.

For example, you may dispute whether the money is owed, the amount claimed or the legal basis on which the creditor is demanding payment.

The court will consider whether the evidence supports the dispute. Simply disagreeing with the creditor or refusing to pay does not automatically provide sufficient grounds to set aside a statutory demand.

2. You Have a Counterclaim or Set-Off

You may have grounds to apply to set aside a statutory demand if you have a qualifying counterclaim, set-off or cross-demand that meets the applicable legal requirements.

For example, you may believe the creditor owes you money under a separate agreement or that the amount claimed should be reduced by a valid set-off.

The nature and value of the counterclaim or set-off, together with the supporting evidence, will be important when assessing whether the statutory demand can be challenged.

3. The Amount Claimed Is Incorrect

If the creditor has included incorrect amounts, disputed charges or sums that are not legally due, you should obtain advice on whether these issues provide grounds to set aside the statutory demand.

The court will consider the applicable legal requirements and the evidence supporting your position.

4. There Is Another Legal Ground for Setting Aside the Demand

Other circumstances may justify an application to set aside a statutory demand. These may include a defect in the demand or another recognised ground under the applicable insolvency rules.

The precise grounds should be identified before the application is prepared.

How to Set Aside a Statutory Demand

If you intend to set aside a statutory demand, it is important to follow the correct court procedure and comply with the applicable deadlines.

The process generally involves the following steps.

Step 1: Review the Statutory Demand

The first step is to review the statutory demand carefully.

You should check:

• The identity of the creditor.

• The amount of the debt claimed.

• The basis on which the creditor says the debt is owed.

• The date and method of service.

• Whether the statutory demand complies with the relevant requirements.

• The grounds on which you intend to challenge the demand.

This initial review helps establish whether there may be grounds for an application to set aside the statutory demand.

Step 2: Identify the Grounds for the Application

Before applying to set aside a statutory demand, you should identify the legal grounds on which you rely.

These may include a genuine dispute about the debt, a qualifying counterclaim or set-off, or another recognised reason why the demand should be cancelled.

Your application should explain clearly why the statutory demand should be set aside and refer to the evidence supporting your position.

Step 3: Complete the Correct Court Forms

An application to set aside a personal statutory demand must be made using the appropriate forms and procedure.

The application must identify the statutory demand, explain the grounds for challenging it and provide the information required by the court.

Using the wrong form or failing to include the necessary information may delay the application or affect its outcome. You should check the current court requirements before filing.

Step 4: Prepare Supporting Evidence

Your application to set aside a statutory demand should be supported by relevant evidence.

Depending on the circumstances, this may include:

• Contracts and agreements.

• Invoices and statements of account.

• Correspondence with the creditor.

• Evidence of payments already made.

• Documents supporting a counterclaim or set-off.

• A witness statement explaining the dispute.

The evidence should explain clearly why the debt is disputed or why another recognised ground for setting aside the statutory demand applies.

Step 5: File the Application Within the Deadline

For an individual statutory demand, an application to set aside the demand will generally need to be made within 18 days of service.

Do not wait until the deadline is approaching before seeking advice. The relevant period and procedural requirements should be checked against the circumstances of your case.

If you have received a statutory demand, acting promptly can help you understand your options and prepare the application correctly.

Step 6: Attend the Court Hearing

The court may arrange a hearing to consider the application to set aside the statutory demand.

At the hearing, the court will consider the grounds for the application and the supporting evidence. It will then decide whether the statutory demand should be set aside.

The outcome depends on the evidence and the applicable legal principles. Making an application does not guarantee that the statutory demand will be set aside.

What Happens After a Statutory Demand Is Set Aside?

If the court sets aside the statutory demand, the creditor cannot rely on that demand in the same way to pursue the bankruptcy process.

However, setting aside a statutory demand does not necessarily extinguish the underlying debt. The creditor may still be able to pursue the debt through another appropriate legal procedure, depending on the circumstances.

If the application is unsuccessful, the creditor may be able to continue considering bankruptcy proceedings, subject to the applicable legal requirements.

For this reason, it is important to prepare the application carefully and understand the possible consequences before proceeding.

Can You Set Aside a Statutory Demand Against a Limited Company?

The procedure for setting aside a statutory demand against an individual should not be confused with the options available to a limited company.

If your company has received a statutory demand and the debt is disputed, you may need to consider an injunction to restrain presentation of a winding-up petition.

An injunction is a different legal remedy from setting aside a personal statutory demand. The application must be made using the appropriate procedure and supported by evidence establishing the legal basis for the relief sought.

If a winding-up petition has already been presented, urgent advice may also be required about whether an injunction to restrain advertisement is appropriate.

What Happens If You Do Not Set Aside a Statutory Demand?

If you receive a personal statutory demand and fail to pay, agree terms or take appropriate action, the creditor may be able to rely on the demand when pursuing bankruptcy proceedings.

For a limited company, failure to address a statutory demand may provide evidence of an inability to pay debts and may support a winding-up petition if the legal requirements are satisfied.

Bankruptcy and company winding-up proceedings can have serious consequences. You should not ignore a statutory demand simply because you dispute the amount claimed.

If you believe the debt is incorrect or that the demand is legally defective, obtain advice on the appropriate response as soon as possible.

How We Can Help You Set Aside a Statutory Demand

If you have received a statutory demand and want to challenge it, Nigel can assist you in understanding the available options and the steps involved in the application process, subject to the services offered.

Assistance may include:

• Reviewing the statutory demand and the creditor’s claim.

• Identifying potential grounds for setting aside a personal statutory demand.

• Assessing evidence supporting a dispute, counterclaim or set-off.

• Explaining the court forms and application procedure.

• Helping prepare supporting documents and witness evidence.

• Advising on the distinction between setting aside a personal statutory demand and seeking an injunction for a limited company.

Every statutory demand is different. The appropriate procedure depends on the type of debtor, the nature of the debt and the stage of any insolvency proceedings.

Contact Nigel About Setting Aside a Statutory Demand

If you have received a statutory demand and believe you have grounds to challenge it, contact Nigel as soon as possible.

The deadline for applying to set aside a personal statutory demand is important, and the application must be prepared in accordance with the applicable court rules.

Whether you need to set aside a statutory demand personally or obtain advice about a statutory demand against a limited company, early advice can help you understand the available remedies.

Contact Nigel today for assistance with setting aside a statutory demand, reviewing the debt and identifying the appropriate legal procedure to protect your position.