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Dealing with a statutory demand: case study

STATUTORY DEMAND

Two words that can confuse and terrify, whether you’re an experienced business owner or Joe Bloggs. Unfortunately, in our experience, it is all too easy to bury your head in the sand and ignore a stat demand.

Read the story below for an extreme – but real-life – example of how quickly they can spiral out of control, why it’s never too late to grab the bull by the horns and deal with a stat demand, and our top advice on exactly what to do as soon as you receive one of these documents.

 

The story:

The client’s family approached us in a state of utter panic. The father of the house had gone into hospital very seriously ill and, on attempting to get his business affairs in order, they had discovered a statutory demand which was long past its limit for response.

For the uninitiated, a statutory demand (stat demand for short) is a formal written request to settle a debt. They can be served to a business or an individual. If you don’t either settle the debt or reach an agreement with your creditor within 21 days, they can apply to make you bankrupt if it’s an individual, or they can ask for your business to be wound up. Winding up is the method of ending, or dissolving, a business. This includes selling any assets, paying off creditors, and distributing remaining assets to the partners or shareholders..

Land and Property Services were pursuing the man in question for unpaid rates on a building he’d let out as a commercial landlord. He had – unwisely – ignored the stat demand and had therefore been adjudicated bankrupt. Not only was he in hospital seriously ill, but it now looked as though his family might lose their house.

 

The solution:

If you think this one sounds complex – we haven’t even scratched the surface; as you will discover if you read on!
Our Managing Director James, who specialises in personal insolvency, was able to build a case to prove that the bankruptcy order ought not to have been made against this individual.

By digging down into the fine detail of the debt and the complex legal structures surrounding it, James was able to establish that the statutory demand was not for a debt that this client owed.

He explains, “When we did a deep dive, this guy had inherited a business that was struck off by Companies House due to non-compliance – he hadn’t been filing his annual returns. The business had owned property which, upon the strike off of the company, was divested bona vacantia – this is a term describing an ownerless property which is passed into the ownership of the Crown. The business at that point no longer owned the property – the Treasury did.”

Despite the property essentially belonging to the State, unknowingly, the client continued to rent it out for a period of 8 years. It became apparent that due to a mix up, the rates had not been paid.

Land and Property Services discovered his identity of the business owner with a bit of detective work via the tenants and letting agent and attempted to recoup the rates.

We did two things to resolve this case:

1. We were able to demonstrate to LPS that the bankruptcy order ought not to have been made because he did not own the property. The Crown owned the property at the time.

2. Whilst the rates were obviously a liability due to be paid, due to the gentleman’s declining health, we successfully appealed to the Crown for no further pursuit of the rates.

Further to this, the family discovered a further £6,000 in personal credit card debt which we were also able to successfully appeal to be written off, again due to the man’s obvious vulnerability.

Although an extreme example, this is very much a good news story – despite the poor decisions made by this individual, we were able to resolve the situation and allow his family to keep their house.

James’ knowledge of the technical ins and outs and experience of the relevant authorities and legalities led to the bankruptcy being prevented and this stat demand not being acted on.

 

The lessons learned:

 

If you or someone you know has received a statutory demand and could use some friendly guidance, give us a call today.

Got an idea for a business or personal finance, cashflow or insolvency issue we could tackle on the blog? Get in touch! Drop a line to info@jtmaxwell.co.uk or join the conversation over on our FacebookTwitter, Instagram or Linked In.

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