Statutory demand

AuthorMark Watson-Gandy
Pages1-11
Chapter 1Statutory Demand

A company may be wound up by the court if it is unable to pay its debts.1One (but not the only) means of showing this is by the service of a statutory demand.2

A company is deemed unable to pay its debts3if a creditor (by assignment or otherwise) to whom the company is indebted in a sum exceeding £750 then due has served on the company’s registered office a statutory demand in the prescribed form requiring the company to pay the sum so due, and the company has for 3 weeks thereafter neglected to pay the sum or to secure or compound for it to the reasonable satisfaction of the creditor.

STATUTORY FORM

Form SD1. The statutory demand must be headed either:4

ƒ Statutory Demand under section 123(1)(a) of the Insolvency Act 1986; or ƒ Statutory Demand under section 222(1)(a) of the Insolvency Act 1986.

The statutory demand must set out:5

ƒ the full name of the company;6

ƒ if the company is incorporated in England and Wales:

– the company’s registered number;7

1Section 122(1)(f) of the Insolvency Act 1986.

2Re a Debtor (No 544/SD/98) [2000] 1 BCLC 103. Thus the failure to pay an admitted debt which is due and payable, even in circumstances where the company appears to be healthily solvent on a balance sheet basis, may be treated as showing insolvency – even though no statutory demand has been served: Re Taylor’s Industrial Flooring Ltd [1990] BCLC 216.

3Section 123 of the Insolvency Act 1986. Since 1 October 2015, the threshold figure for bankruptcy has changed to £5,000; however, this change has not yet been applied to corporate insolvency.

4Rule 7.3 of the Insolvency (England and Wales) Rules 2016.

5Rule 7.3 of the Insolvency (England and Wales) Rules 2016.

6Rule 1.6 of the Insolvency (England and Wales) Rules 2016.

7Rule 1.6 of the Insolvency (England and Wales) Rules 2016.

2 Corporate Insolvency Practice

ƒ if the company is incorporated outside the United Kingdom:8

– the country in which it is incorporated;
– the company’s registered number in that country;
– its overseas registered company number under Part 34 of the Companies

Act 2006;

ƒ if the company is unincorporated in England and Wales:

– the company’s postal address;9

– the registered office of the company;

ƒ the name of the creditor;
ƒ the address of the creditor; ƒ a statement that:

– the demand is made under s 123(1)(a) of the Insolvency Act 1986; or – the demand is made under s 222(1)(a) of the Insolvency Act 1986;

ƒ the amount of the debt; the consideration for the debt or, if none, how it arises;

ƒ if the demand is founded on a judgment or order, details of the judgment or order, that is to say:10

– the name of the parties;
– the full name of the court where proceedings were filed; – the court number allocated to the case;

ƒ if the creditor is entitled to the debt as assignee, details of the original creditor and any intermediary assignees;

ƒ a statement that the company must pay the debt claimed in the demand within 21 days of service of the demand on the company, after which the creditor may present a winding up petition unless the company offers security for the debt and the creditor agrees to accept security or the company compounds the debt with the creditor’s agreement;

ƒ contact information for the creditor to enable the company to communicate with him, with a view to securing or compounding for the debt to the creditor’s satisfaction. This must include:

– a named contact accrued at the date of the demand; – the contact’s address;
– the contact’s telephone number;
– the contact’s electronic address;

8Rule 1.6 of the Insolvency (England and Wales) Rules 2016.

9Rule 1.6 of the Insolvency (England and Wales) Rules 2016.

10Rule 1.6 of the Insolvency (England and Wales) Rules 2016.

ƒ that the company has the right to make an application to the court for an injunction restraining the presentation or advertisement of a winding up petition;

ƒ the name of the court before which (on present information) the company must make its application for an injunction;

ƒ any charge by way of interest not previously notified to the company as included in its liability that has accrued at the date of the demand;

ƒ any other...

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