What are 21-day statutory demands and winding-up petitions?
Creditors seeking to secure the payment of an undisputed debt use statutory demands. The important word is undisputed. If you do not agree with the statutory demand, then you can start a legal process to have the statutory demand set aside. But this needs to be done within 18 days.
The statutory demand can only be made if you owe the creditor more than £750. If the debt goes undisputed or unchallenged after 21 days, the statutory demand gives the creditor the right to request the high court to issue a winding-up petition.
A winding-up petition is normally issued to your registered address and if not responded to or defended, the court will issue a winding-up order. When this happens, the company's bank accounts will be frozen and the court will appoint an official receiver as the insolvency practitioner to liquidate the company and investigate company affairs, including the conduct of directors.
Protecting your business from statutory demands and winding-up petitions
When dealing with statutory demands, it is important to remember that most creditors simply want to pressure you to pay the outstanding debt. They usually have no intention of issuing a winding-up petition and only a small number of statutory demands end up as winding-up petitions - it is in the interest of both parties to work out a better solution.
Conversely, a high percentage of winding-up petitions do end up as winding-up orders. Therefore, it is vital to deal with statutory demands and winding-up petitions immediately, so contact 4R today for advice.
Winding-up petitions and statutory demands - the options available
If you've been issued with a statutory demand or winding-up petition, you will need expert legal advice right away. 4R Business Recovery can help you avoid personal liability for the debts of the limited company.
Once the statutory demand is issued, you have a few choices to avoid a winding-up petition:
- Get the debt below £750.00
- Arrive at a settlement or negotiate a payment plan with your creditor
- Seek the protection of a company voluntary arrangement (CVA)
- Seek the protection of administration or a pre-pack
- Take control of the liquidation of the company and seek a creditors' voluntary liquidation
- If you dispute the debt, or think the statutory demand is wrong, apply for a set aside
A set aside is a counter-claim that can be put into effect if the debt is in dispute. You have 18 days from the date of receipt of the statutory demand to apply for a set aside.
Set asides must be done with specialist legal advice to ensure a successful outcome. It can be worth contacting the other side to demand they withdraw the statutory demand, but they often refuse until contacted by your legal team or an insolvency practitioner.
All winding-up petitions must be advertised at least seven days before the hearing in the London Gazette. This advertisement will trigger your bank to freeze your account and other creditors may join the action. At 4R, we can assist in halting Gazette adverts.
Insolvency tools for stopping a winding-up petition or statutory demand
If the business is viable, or if it would benefit from further time to refinance or restructure, then a number of insolvency tools are available to stop a winding-up order. These include administration and CVAs.
If we are called early enough, we can often file a memorandum with the court to protect the business from a winding-up petition and give the company the protection of a CVA.
If the situation is urgent, and depending on your particular circumstances, it may be appropriate to put the business into administration. This will delay or stop the winding-up petition and prevent a winding-up order, providing time to put a rescue solution in place.
The administrator can, while the business is in administration, run and operate the company under the protection of the courts. This means they can arrange for the sale of the business or propose a CVA to protect the business and allow debts to be repaid over the next five years.
If a winding-up petition has already been served, different options should be considered. If this is the case, then contact 4R immediately for advice.
Statutory demands and winding-up petitions: get help today from 4R
If you need hands-on business turnaround experience, 4R can help. Over the years, we've helped many clients rescue their businesses and create wealth.
We work closely with clients to help them with statutory demands and winding-up petitions. Where a company cannot be saved; we will offer business insolvency advice and arrange the best solution. We also strive to ensure that stakeholders are sheltered from personal loss.
To find out about how 4R can help your business, contact us. We'll be happy to discuss your requirements and provide a free consultation, including information about how to deal with statutory demands and winding-up petitions.
You can also apply online for advice - the sooner you get help, the better your chances of getting out of debt.
You may also find useful information in our news and media section. This section is kept up to date with the latest financial and business news and we offer a number of free guides and tutorials about statutory demands and winding-up petitions.