Statutory Demands (Setting Aside)

Have you received a Statutory Demand?

You must act quickly (within 18 days to issue a set aside application) when you receive a statutory demand if you hope to avoid the creditor bankrupting you or applying for a winding up petition.  Where that creditor is Her Majesty’s Revenue & Customs (“HMRC”), it is inevitable that unless action is taken the demand will eventually lead to the presentation of a winding up or bankruptcy petition.

Need a second opinion on your insolvency litigation? Our specialist solicitors & barristers can help by assessing your case prospects. We have highly experienced dual-qualified lawyers, so we can advise you of the best strategy in our first meeting.

What is a Statutory Demand?

Insolvency Rules 2016 (“IR 2016”) parts 7.2 and 7.3 define a statutory demand as a written notice that requests payment of a debt that a company owes to a creditor. When a creditor serves a statutory demand on a company, it is a sign that the creditor intends to file a winding-up petition to dissolve the business if the relevant debt is not settled.

A statutory demand may also be used to require a person to pay a debt. Insolvency proceedings for people, however, are subject to different rules and are known as bankruptcy proceedings.

When a company’s debt is still owed and exceeds £750 in value, a creditor has the right to issue the company with a statutory demand.

A statutory demand outlines a creditor’s claim against a debtor.  The statutory demand is intended to be relied upon in further legal proceedings against the company or an individual (to wind up a company or partnership, or to bankrupt an individual) and which ought to:

  • Provide details of the financial claim, with interest calculated to the date of the demand;
  • Be served on the debtor personally or by post; and
  • Tell the debtor what to do to comply with the demand, have it set aside and the consequences of doing neither.

The format must follow the guidelines set out in the Insolvency Rules 1986, but it is not a court document.  Although the demand is dated at the time of issue, it does not expire.  The time limits to deal with a demand only apply from the date of service.

What Grounds does a Company have to Dispute a Statutory Demand?

A statutory demand given to a company can only be contested on a very small number of grounds. Ordinarily, the court will not permit a winding-up petition against a company based on a statutory demand to proceed if the following conditions are met:

  • The debt alleged in the demand to be owing is genuinely disputed by the company on substantial grounds;
  • Ordinarily, the court will not permit a winding-up petition against a company based on a statutory demand to proceed if the following conditions are met;
  • The debt alleged in the demand to be owing is genuinely disputed by the company on substantial grounds;
  • The English court has no jurisdiction.

Blank Statutory Demand Forms

The following are the current blank statutory demand forms which you can download in Microsoft Word format. If you intend to use one of these forms you should take expert legal advice to ensure the correct form is used and that the form is set out correctly. Any mistakes may result in serious costs consequences which may exceed the amount of debt sought.

Statutory Demand under section 123(1)(a) or 222(1)(a) of the Insolvency Act 1986
Blank Statutory Demand Form 4-01

Debt for Liquidated Sum Payable Immediately
Statutory Demand under section 268(1)(a) of the Insolvency Act 1986
Blank Statutory Demand Form 6-01

Debt for liquidated sum payable immediately following a judgment or order of the court
Statutory demand under section 268(1)(a) of the Insolvency Act 1986
Blank Statutory Demand Form 6-2

Debt payable at future date
Statutory demand under section 268(2) of the Insolvency Act 1986
Blank Statutory Demand Form 6-3

Setting Aside a Statutory Demand

An application to have a served statutory demand against a company set aside does not have any formal procedure. However, under rule 10.4 of the IR 2016, a person who has received a statutory demand may ask a court to set it aside.

A company has only two options if it wants to contest a statutory demand:

  • By applying for an injunction to stop presentation or a winding-up petition based on the demand in accordance with rule 7.24 of the IR 2016.
  • If the creditor submits a winding-up petition based on the demand, by objecting to the creditor’s request for a winding-up order against the company.

A company may also ask the creditor for permission to revoke the statutory demand. Although there is no official process for withdrawing a demand, in practice the creditor’s written confirmation of withdrawal or an agreement not to file a petition for winding up may be acceptable.

It is imperative that you act promptly – you have in the first instance only 18 days as of right to apply to the Court for a set aside once you have received a Statutory Demand. Should you apply later than 18 days after the date of service, your application will be listed only at the Court’s discretion and you will need the permission of the Court to make the application.  Often the use of Statutory Demands is inappropriate and in many cases they can be set aside by the Court.  This will prevent a creditor from commencing any formal insolvency process against you.

A company may also seek the creditor’s agreement to withdraw the statutory demand. There is no formal procedure for a demand to be withdrawn, but in practice the creditor’s written confirmation of withdrawal or an undertaking not to issue a winding-up petition may be acceptable.

Case Study: Setting Aside a Statutory Demand

Moskalev v Yanishevskiy (Costs) [2021] EWHC 1575 (Ch)

In the above case (Moskalev v Yanishevskiy) we represented Mr Moskalev. Mr. Moskalev was served with an English statutory demand which was allegedly based on a fraudulently obtained default judgment from the High Court of Hong Kong. In the circumstances, we disputed the statutory demand and filed an application to have it set aside. High Court ICC Judge Barber determined that Mr. Moskalev was the successful party and ordered Mr. Yanishevskiy to pay Mr. Moskalev’s costs. The judge concluded that we had raised substantial grounds to dispute the debt claimed in the statutory demand and that, since Mr. Yanishevskiyhad withdrawn the demand, the applicant (our client) was the successful party. Therefore, it was appropriate to award costs in favour of Mr. Moskalev. Please visit the Lexlaw website for more detailed information about this successful Statutory Demand Set Aside case.

How Can We Help you Oppose a Winding Up Petition?

Our specialist winding-up petition lawyers are experts in defending winding-up petitions. We can advise you as to the specific merits and demerits of your case and can assist you in opposing winding up petitions and negotiating with creditors. If your company has been issued a winding-up petition or statutory demand, you may be able to challenge that petition on the following grounds:

  • That the debt alleged in the statutory demand or petition to be owing is genuinely disputed on substantial grounds by your company;
  • Your company has a genuine right of set-off against the creditor that exceeds the amount claimed in the statutory demand; or
  • In certain other limited circumstances (for example such as jurisdiction, technical or procedural error or delay or on grounds of abuse of the proper court process that this is reality aggressive debt recovery action).

To oppose a winding-up petition, you will initially need to file a witness statement in opposition with the Court within five business days before the date when the petition will be heard by the Court (rule 7.16 of the Insolvency (England and Wales) Rules 2016). A copy of that witness statement will need to be provided to the petitioning creditor at least five business days before the hearing.

Your company is entitled to appear at the petition hearing so as to oppose the making of a winding-up order. It is a routine matter for companies to instruct solicitors and/or barristers to appear on their behalf at the hearing.

Our Statutory Demand Experts are able to give specialist legal information and advice relating to statutory demands. To contact one of our Statutory Demand Solicitors or Statutory Demand Barristers please click here or call 02071830529.

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The information on this website is not legal advice; you should always obtain specific advice on the circumstances of your case. Our Winding-up Petition Solicitors & Barristers provide specialist legal advice based on decades of expertise. Click here or call +442071830529 to get in touch. For regulatory reasons we do not take on low value cases nor provide free legal advice, information or guidance and our team cannot answer questions from non-clients.

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