This is an interesting and frequently asked question. It is therefore perhaps surprising to learn that there is no direct case law authority on this point. Whilst the registration of a foreign judgment debt might serve to strengthen a creditor’s position should arguments about the validity of a judgment be made (as the court is likely to treat a registered judgment the same as a UK judgment), is it really necessary in these circumstances? Given the time and cost inherent in registering a foreign judgment, the quicker and cheaper option of serving a statutory demand is often a much more appealing option for creditor companies.
This article seeks to: (1) set out the relevant law, and (2) provide a summary of how this issue is dealt with in practice.
Brief background: Why serve a statutory demand on a company?
A statutory demand is often used by a creditor because, if it remains unpaid for more than 21 days, this can be used to support a winding petition on the grounds that the debtor company is unable to pay its debts (section 122(1)(f),
Insolvency Act 1986 (“IA 1986”)).
Inability to pay its debts under IA 1986
One of the circumstances in which a company is deemed to be unable to pay its debts (as defined in section 123 of the IA 1986) is: “[i]f a creditor to whom the company is indebted in a sum exceeding £750 then due has served on the company, by leaving it at the company's registered office, a statutory demand and the company has, for three weeks, neglected to pay the sum or to secure or compound for it to the reasonable satisfaction of the creditor” (section 123(1)(a), IA 1986).
Accordingly, the service of a statutory demand provides one way of establishing a company's inability to pay its debts.
Companies within the jurisdiction of the English courts
A statutory demand may only be served on a company within the winding up jurisdiction of the courts of England and Wales. The courts' winding up jurisdiction extends to:
- Any company registered in England and Wales (including a Limited Liability Partnership (LLP)) (section 117(1), IA 1986).
- A company whose centre of main interests is situated in England and Wales (Article 3(1), Regulation (EU) 2015/848 of the European Parliament and of the Council of 20 May 2015 on insolvency proceedings (recast) or, in relation to insolvencies commenced before 26 June 2017, Article 3(1), EC Regulation on Insolvency Proceedings 1346/2000).
- An unregistered company (which includes a foreign company) (section 221(1), IA 1986).
On the basis of the above, and given the lack of direct case law authority on this point, it certainly seems possible to base a statutory demand against a company on a foreign unregistered judgment. Whilst the writer cannot categorically confirm that this is appropriate in all instances, in practice, statutory demands are served in respect of foreign unregistered judgment debts on a regular basis. Provided that the requirements set out in section 123 of the IA 1986 and the jurisdictional requirements are met, this writer sees no reason why a creditor cannot proceed in this way.