When dealing with a statutory demand the creditor can follow the bankruptcy process or winding-up proceedings, although usually as a last resort to assist the creditor with the details of the debtor’s assets. A bankruptcy or winding-up petition is usually filed by a creditor, in the event that the debtor is unable to pay.

Creditors must be made aware of avoiding an allegation of abuse of process, which occurs when a creditor petitions for bankruptcy or the winding-up process in order to obtain collateral or any other grounds separate from the initial debt. As the new debt that the creditor is claiming for is undisputed, and therefore abuses the bankruptcy process.

What are the necessary steps to take when an organisation is served a disputed statutory demand?

When dealing with corporate insolvency, unlike personal insolvency, there is no prescribed process when setting aside a statutory demand. Organisations should also be aware of receiving a winding-up petition which could tarnish, or even ruin even the most acclimated business, especially if it is advertised.

The winding-up process is when an organisation must sell all the assets of a business, in order to pay their debts to creditors, followed by allocating any remaining assets to partners or shareholders and then dissolving the business.

Debt-recovery or credit-collection agents are utilised by numerous organisations in order to redeem a variety of different payments from debtors, whether that be for trade debts, rent arrears, parking charges, or even utility bills.

Debt collection companies must obtain a consumer credit license from the Financial Conduct Authority, which is in place to regulate consumer credit activities, and monitor any unlawful tactics against consumers.

It is not unusual for debt to be disputed, although there must be substantial reasoning behind the dispute, and will ultimately cause conflict between the consumer and the debt collection agency.

What is the difference between disputed debt and good debt in a statutory demand?

Disputed debt in a statutory demand is when a creditor attempts to claim debt that the debtor claims is not owed to them, therefore they are not insolvent.

A good petitioning debt is when the debt is in a liquidated form - which is both specific and agreed - for immediate or future payment whilst the debtor cannot afford to pay the debt.

Most organisations will draw up legal contracts with a variety of parties including employees and third-parties before providing or receiving a service from the other contracted parties.

It is important to understand that a contract is not legally binding unless it includes the following:

• An official agreement which consists of making an offer and receiving acceptance of the specific terms within the contract.
• The intention to commence legal relations in the form of a lawful agreement.
• Consideration of any promise given in return for receiving a benefit promised by the other party. I.e. Money exchanged for goods or services.

• INDIVIDUALS AND STATUTORY DEMAND.

  

  What are the necessary steps to take when an individual is served a disputed statutory demand?

  One option is to contact the creditor to dispute the statutory demand, which will lessen costs for both parties, however a statutory demand must be responded to within 21 days, therefore this could be problematic if a response is not received from the creditor within this time frame.

  If no response is received from the creditor, then the next step is to submit an application to the appropriate court (Usually the court that set out the statutory demand itself) to set aside a statutory demand under the recent Insolvency Rules (6^th April 2017).