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Breaking news on debt recovery and statutory demands

A statutory demand is a legal device used by creditors to pursue a debtor, either a company or an individual, for monies owed.

It is used invariably where liability for the debt is not controversial. In the case of an individual, it can be the first stage of bankruptcy and in the case of a company it could result in a winding up of the company.

As a result of Covid-19, the UK Government has sought to provide protection for businesses. The intention to introduce legislation – the Corporate Governance and Insolvency Act – has been known about for weeks. The change was inevitable but appeared to be hanging in the air.

There has now been a development.

The Corporate Governance and Insolvency Bill has been laid before Parliament and the Act is imminent.

The Bill appears to refer to only registered and unregistered companies and makes no reference to individual insolvency. Hence, the position appears to be that statutory demands against individual debtors are permissible.

The Bill appears to avoid all statutory demands made between 1st March 2020 and 30th June 2020, and prevents petitions based on those demands. In other words, a petition cannot be presented after the 27th April 2020 if the statutory demand is served between the 1st March 2020 and the 30thh June 2020.

Furthermore, petitions cannot be presented unless the creditor has reasonable grounds for believing that Coronavirus has not has a financial effect on the company. It will be interesting to see how the court interprets the terms ‘reasonable grounds’ and ‘financial effect’.

My business is owed money – what can I do?

The statutory demand route is one way of pursuing money owed. A claim at court may have to be issued in any event in order to prevent the claim becoming time barred under the Limitation Act. Further, court proceedings may have to be taken if the situation is urgent.

This is a complex area of law. Linder Myers acts for both creditors and debtors and can advise you on the best way to pursue or defend a claim.

Contact Paul Magee, Head of Litigation directly for advice in relation to pursuing or defending a claim, on 01244408317 or email Paul.magee@lindermyers.co.uk

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