‘Setting aside’ a Statutory Demand served on a company

Posted by Natasha Biggs

Associate

There is no requirement for a Statutory Demand to be served on a company before a Winding Up Petition is presented, however if a company is served with demand then immediate action needs to be taken.

There is no formal procedure to apply to set aside a Statutory Demand where it was served on a company, however failure to deal with the demand may mean that a Winding Up Petition is presented.

There are several options open to you:

  1. Ignore it, and risk winding up proceedings being commenced against the company;
  2. Dispute the debt and ask the Creditor to agree to set aside (withdraw) the statutory demand;
  3. Pay the full sums demanded (within 21 days);
  4. Reach a settlement with the Creditor; or
  5. Apply to restrain the creditor from presenting a petition or from advertising the petition if it has already been presented.

It is worth bearing in mind, that if you wish to negotiate a settlement with the Creditor you need to keep an eye on the deadlines and take action before they expire as you do not want to prejudice the company’s position.

The Debtor should first negotiate with the Creditor to try and obtain an undertaking from them that they will not present a Winding Up Petition without first providing the Debtor appropriate notice.  This may mean that an application for a restraining order is not needed straight away whilst the companies negotiate.   However if this is not forthcoming then an application may be required.

The company may be successful in their application for a restraining order if they can show that they are solvent and:

  1. There is a genuine substantial dispute in relation to the debt;
  2. The Debtor company has a counterclaim, cross demand or set off which is equal or above the amount being claimed;
  3. To allow the petition would be an abuse of process or would be bound to fail;
  4. The petition and subsequent Winding Up would be oppressive or unfair to the company;
  5. There is an alternative route available to the Creditor which would be more appropriate.

In order to apply for a restraining order, an application, accompanied by a witness statement, needs to be presented to the Companies Court.  The Court may deal with the matter on paper but is likely to order a hearing.

It is clear that quick action has to be taken so as to avoid the possibility of a Winding Up Petition being presented or advertised.  The law surrounding these areas can be complex and it is vital that advice is sought quickly.

For further information please contact Natasha Biggs on 01634 828277 who will be happy to discuss your individual circumstances.


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