HomeFWJ TakeawayResourcesStatutory demands and winding up proceedings

We often get asked whether to issue a statutory demand against a company or go straight for a winding up order. The answer is complex - especially with temporary Covid restrictions in place. Our team of experts are here to advise.

Important factors to consider before choosing which route to follow

There are a number of issues to consider when deciding whether to go first for a statutory demand against a company or to go straight for a winding up petition against a company.

The points below are also subject to the latest government restrictions due to Covid. These are under constant review – but the Corporate Governance & Insolvency Act did put some temporary restrictions in place. Our team is always up to date on these and how they might effect you.

Matters to bear in mind include:

  • A winding up petition is a formal issued document at court and as such, incurs a court fee to issue it. At present, the court fee including the official receiver’s deposit is £1,880. Coupled with the process server fee and solicitors costs of issuing, this can mean upfront costs over £2,000 to commence the winding up petition process. statutory demand costs are much lower, in the region of £500.
     
  • However, a winding up petition is more “hard hitting” than a statutory demand and can immediately get a debtor’s attention – and far quicker than may be the case with a statutory demand.
     
  • If the debtor pays the winding up petition debt (or part of it), you have a good argument for payment of the winding up petition costs in full, resulting in no cost to you at all. This isn’t always the case in statutory demands.
     
  • A statutory demand is less risky in the sense that if it becomes “disputed”, it is easier to pull out of a statutory demand than it is a winding up petition as it is not a formally issued court document.
     
  • With a statutory demand, if it goes unanswered after 21 days, then a creditor is entitled to deem the debtor insolvent and unable to pay its debts. With a winding up petition, if a statutory demand has not been served first, then it may be the case later on that the petitioning creditor is asked to prove that the company is insolvent on a balance sheet basis. By serving a statutory demand first, it removes this requirement to prove that the company is unable to pay its debts pursuant to Section 122(1)(f) of the Insolvency Act 1986.
     
  • A statutory demand is a good way to try and flush out any potential arguments that the debtor may have in circumstances where it is simply failing to respond to pre-action letters. It can also help avoid the often slow county court or small claims court process.
     
  • A winding up petition will get you straight to the front of the queue if there are other creditors also after the company. With a statutory demand it might just give the debtor another 21 days to avoid making payment.

Let us help you make the right choice

There is a lot riding on choosing the right option. Every set of circumstances are different, but here at Francis Wilks & Jones, our team has dealt with thousands of such situations over the years. Our experience and expertise will help you make the right choice and avoid the pitfalls of going down the wrong route. Let us help.

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