If a creditor has made several attempts to recover a debt without success, they may decide to escalate the situation by issuing a Statutory Demand against your business. It’s often the case that a Statutory Demand is not the first form of legal action a creditor takes. However, it’s very serious, as it’s the first stage in a creditor initiating insolvency proceedings against you.
Your company can be issued with a Statutory Demand if:
There’s a clear invoice referring to the debt and the amount you owe
You owe more than £750
The date the payment was due has passed
You do not dispute the debt
The debt is not part of a payment arrangement that’s already in place
The creditor does not have security over assets that cover the value of the debt
HMRC is one creditor which uses Statutory Demands to recover business tax arrears. However, any individual or company you owe money can issue this type of demand as long as they use the correct forms and serve it in the prescribed way.