During an economic downturn, businesses often face problems with cash flow due to slow payments from debtors. If the usual phone calls and emails don’t work, many will turn to issuing a statutory demand to recover money owed.

This is a powerful tool for creditors. It requires a debtor company to pay an outstanding debt within 15 working days of being served. A correct statutory demand must include the amount owed, the nature of the debt due, and advice of the 15 working day payment deadline. The demand must also be properly served on the company which typically involves serving it at the company’s registered office. A demand should only be issued if the debt is not genuinely in dispute.

A company receiving a statutory demand must act quickly. If it fails to pay the outstanding debt within the 15 working days, it is presumed insolvent, allowing the creditor to make an application to the court to place the company into liquidation. Other options to address potential insolvency could be providing security over property or appointing a receiver. Speed in these steps is key, so seek advice promptly if you receive a demand.

A company on the receiving end of a statutory demand has the right to apply to the High Court to set it aside within 10 working days of being served. Usually, this will be on the basis it can show a genuine and substantial dispute relating to the debt or a counterclaim against the creditor. It is important to avoid issuing a demand if there is a genuine dispute, as you could unintentionally become a party to litigation, which comes at considerable costs without necessarily achieving the desired outcome.

If you are considering your options for recovering a debt or have been served a statutory demand, it is critical to comply with the strict requirements and act fast. White Fox & Jones has experience in guiding clients through both sides of the statutory demand process. To get it right and minimise risk, get in touch.