Last editedNov 20212 min read
Lending money is a common phenomenon in the world of business, whether through credit or loans, and it’s actually usually beneficial to both parties. The borrower is able to free up some cash flow and invest in certain business operations, while the lender receives interest on the money that they loaned. However, it’s not always simple for the lender to collect debts, and late payments can be difficult to chase up.
One of the ways that the lender can attempt to recover the funds that are owed to them is by issuing a statutory demand. Put simply, this is an urgent request for the debtor to pay their debts, with the result that the creditor can petition for bankruptcy if the debtor fails to make this payment. Keep reading to find out more about statutory demands and how to make and issue them.
What is a statutory demand?
Many creditors who are struggling with missed payments find themselves asking: “what is a statutory demand?”. Well, statutory demands are formal written statements demanding that a debtor repay their debts within 21 days. If the debtor is unable to do this, then the statutory demand can be used as evidence that they are in fact unable to pay their debts, which can be used in a court petition for bankruptcy.
Statutory demand forms
The first step to issuing a statutory demand is filling out a statutory demand form. You can go to the gov.uk website to find all the relevant forms, and you will need to select the correct one according to the nature of the loan. This will depend on whether the debt is payable now, payable in the future or payable following a court order, as well as whether you are collecting from an individual or a limited company.
Statutory demand forms are relatively simple to fill in. You will need to provide some basic information, including name, address and other contact details, as well as information about the loan. This includes the amount that is owed to you, the relevant dates and your relationship to the debtor.
Service of statutory demand
Once you’ve filled in the form, you then need to serve the statutory demand. This is a legal term which essentially means delivering the form to the debtor, but there are certain things that you need to remember when doing this.
You have several options of how to serve the statutory demand form:
By delivering it to the individual directly at one of their known addresses.
By leaving the form at the registered office of the company that owes you money.
By giving the form directly to the director of the company.
By asking a third-party process server to deliver it for you, which can be arranged by your solicitor.
Make sure you keep a record of when you delivered the demand as this will be required if it is ignored. This record should include the time and date you served the demand, which could be a receipt from the post office or a formal confirmation from the process server. If you have any record of the debtor receiving the demand, such as e-mail confirmation, then keep this too.
What happens after issuing a statutory demand?
There are several possible results to you serving a statutory demand:
The debtor may acknowledge the demand and repay their debts. This is the desired result as it will make life easier for both creditor and debtor.
The debtor may ignore the demand, which is when it is important to have evidence of serving it.
The debtor may refuse to pay their debts.
In the latter two cases, you will need to continue with bankruptcy proceedings to recover any funds that are owed to you.
We can help
GoCardless helps you automate payment collection, cutting down on the amount of admin your team needs to deal with when chasing invoices. Find out how GoCardless can help you with ad hoc payments or recurring payments.