A statutory demand is a way to prove that an individual or a company cannot pay their liabilities as they fall due and are therefore insolvent. Proving insolvency is necessary if the creditor wishes to petition for the individual’s bankruptcy or the company’s winding up – it is not a debt recovery procedure. Failing to appreciate this can cause significant loss to a creditor. If a statutory demand is served where the debt is disputed, the creditor may have to pay the debtor’s legal costs for setting aside the statutory demand against an individual or for an injunction preventing the presentation of a winding up petition by the creditor. Read more about statutory demands and how to deal with them here.
Even if the statutory demand is not challenged the decision to present a bankruptcy or winding up petition is not an easy one.
We have wide experience of advising companies and individuals about how to deal with insolvency proceedings.