Statutory demand against a company – general procedure
September 1997
A statutory demand is a written demand for payment of a sum due, served by a creditor on a company under s123(1) (a) (registered companies) or s222(1)(a) (unregistered companies). (See also paragraph 45.28) [Note 1].
It is a quicker method of chasing a debt than first obtaining judgment but if the demand is unsuccessful because the party on whom it was served has a valid defence, the company can apply for an injunction restraining the alleged creditor from presenting a winding up petition and the costs thereof will be payable by the petitioner [Note 2].
A minor error in the statutory demand regarding the amount due will not invalidate it [Note 3].
45.36 Format of statutory demand and information to be included
(Amended October 2010)
The statutory demand must be dated and be authenticated either by the creditor himself or a person authorised to act for him. It must be in the prescribed form and state the amount of the debt and the consideration for it [Note 4] [Note 5].
In order that a company has every opportunity to respond, information must be given in the statutory demand as to its purpose, the fact that if it is not complied with winding up proceedings may result and the time and methods for compliance. Also to be provided is the name, address and telephone number of a person with whom contact can be made with a view to securing or compounding the debt to the creditor’s satisfaction [Note 6].
For post 6 April 2010 petition cases, the statutory demand must also state that the company has the right to make an application to the court for an injunction restraining the creditor from presenting or advertising a petition for the winding up of the company [Note 7]. An application for such an injunction must be made to a court having jurisdiction to wind up the company [Note 8].
45.37 Service of the statutory demand
In the case of a registered company, the statutory demand is served by leaving it at the registered office of the company [Note 9]. In Re: A Company [1985] BCLC 37 Nourse J. held that a demand made by telex machine is not effective service of a statutory demand. He considered that the service should be regarded in much the same way as service of a winding-up petition. However, in Re: A Company (No 008790 of 1990) [1991] BCLC 561 Morritt J held that a statutory demand sent through the post to a company’s registered office had been properly served. In this case the demand had been sent by registered post and was acknowledged by the company. Morritt J. stated that it made no difference whether the act of leaving the demand at the registered office was carried out by the creditor personally or by the postman. All that was required to be proved was that the demand was left at the registered office. It would appear that proof of posting alone would not have been sufficient.
In the case of an unregistered company the statutory demand may be served by leaving it at the principal place of business of the company, or by delivering it to the secretary or some director, manager or principal officer of the company, or by otherwise serving in such manner as the Court may approve or direct [Note 10].
Whilst courts do have jurisdiction to set aside statutory demands, this will only be exercised if there is a genuine dispute as to the existence of the debt [Note 11].
[Back to Part 2 – Who may petition and grounds for winding up] [On to Part 4 – The winding-up petition]