100 Top Legal Tips for Businesses #2 – Statutory Demands

09-03-2017

Did you know a debt of just £750 could take your business to the brink of oblivion?

No? You’re not alone.

Most business leaders are pretty busy, and it’s easy to overlook the odd letter in the heaps of paper that cross your desks daily.

Yet not taking note could spell disaster. I’ve seen cases where reputable businesses have been served with statutory demands for unpaid bills that they’ve simply overlooked.

Yet not responding to one of these beauties within 21 days could result in the claimant applying for a winding up order on your entire business. And they can do this for outstanding claims of as little as £750!

Imagine your thriving business, with its annual turnover of thousands or even millions, facing closure due to one, relatively small, unpaid bill. Yet it happens.

Key facts about statutory demands

  • They can be issued creditors to individuals or businesses that owe them money
  • They give a deadline of 21 days for the debt to be paid, and after that the creditor can apply to wind up a company, or make an individual bankrupt
  • They are an extreme step and should only be used where the relationship between the creditor and the company or individual has irretrievably broken down
  • They should also only be deployed when there is no possible dispute about the sum owed, because otherwise a court is likely to stop any winding up proceedings and charge the issuer costs
  • Statutory demands can only be issued against companies and individuals that are solvent – and the minimum debt for a company is £750, or £5,000 for an individual
  • A statutory demand can be issued as soon as a debt is due – we would always advise allowing for the common 30 days invoice terms – and can be sent simply by recorded delivery
  • If the debt isn’t settled within the time limit, a creditor can apply to wind up a company or make an individual bankrupt. They then have the option to bring further small claims proceedings at court
  • Very often, the threat of a statutory demand alone is enough to prompt payment. However, if the dispute does progress to winding up or bankruptcy, there is no guarantee that the creditor will be prioritised for payment, among the range of stakeholders to whom money is owed.

Implications for your business

So, anyone can make a statutory demand to ask for payment of a debt from an individual or company, so long as the debt in question is less than six years old.

At James Legal, we’re on a mission to make businesses more aware of the potential pitfalls they face, so that they can avoid them and save time, money and stress.

There are a number of questions that come into play when we help a business understand and respond to a statutory demand. Of course, if you legitimately owe the money and the outstanding bill is not subject to dispute, you would be wise to settle it immediately. If you don’t realise until after the time limit, it is important to contact your creditor and negotiate an agreement without delay, before matters escalate.

However if, for whatever reason you don’t believe the claim is legitimate, for example, if you have disputed the delivery of the product or service it relates to, we can help you deal with this, by negotiating first with the person who served the demand and, if that proves fruitless, representing you in court.

If you have failed to pay because your company is experiencing financial difficulties, again, we can mediate on your behalf to try to agree an affordable payment plan, or offer assets such as property as security against the debt.

TOP TIP

If something lands on your desk that you don’t understand – get advice straightaway. You may not realise its significance and a few days’ delay can make the difference between us being able to sort out a situation for you, or not.

If you could have a business issue or just need some advice on getting all your cards lined up, why not give me a call on 01482 974 471, or email me at gary.swann@jameslegal.co.uk


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