What is a company County Court Judgment (CCJ)?
A County Court Judgment, known as a CCJ, is a court order issued to an individual or a company due to non-payment of debt. For a company, this might mark the initial move towards compulsory liquidation if the outstanding debt is not promptly addressed.
How Does a CCJ Impact the Company and Its Directors?
A County Court Judgment (CCJ) is an order from a county court that can be issued against a company to ensure repayment of debts. If left unsettled for over 30 days, it can adversely impact both your business and your role as a director.
Seeking a CCJ is a significant measure that creditors may resort to after exhausting other avenues for debt recovery. A CCJ can carry enduring consequences for your business, making it crucial to understand its implications and how it can impact both your company and your role as a director.
How do creditors obtain a CCJ against your company?
Typically, a creditor won’t pursue a CCJ unless you are significantly overdue in repaying your debts and they have made repeated efforts to prompt payment without success.
If they are unconvinced about your willingness or intention to settle the debts, they retain the right to request the court for a CCJ.
The CCJ process commences with the issuance of a County Court Summons. Normally, a business has a 14-day window to reply to the court, but you can request an extra 14 days if needed. Failure to respond to the summons or reach an alternative agreement with your creditor for debt repayment will lead the court to default and issue the CCJ, which will be recorded against your company.
Can you prevent the court from issuing a CCJ against a company?
As mentioned earlier, it might be feasible to prevent the court from issuing a CCJ against your company if you have valid reasons to challenge this legal step.
If you disagree with the claimed debt amount or dispute the existence of the debt, you can contest the judgment. This involves submitting form N244, accompanied by supporting documents, within the specified timeframe after receiving notice that a creditor has applied for a CCJ.
Should you seek to have the judgment set aside, the process will probably entail a court hearing, which requires your presence.
Failure to attend may result in your challenge being dismissed, and you’ll be directed to settle the judgment amount. When completing the application form, you’ll need to indicate any dates when you are unavailable for a hearing. A court fee of £255 is applicable unless you qualify for an exemption.
What happens if I pay the CCJ amount in full?
If the debt is valid, the sole method to avoid the CCJ being noted on your credit file is to settle the entire amount within 30 days of the judgment date. Failing to do so will result in the CCJ remaining visible for the subsequent six years.
Paying after the 30-day period, whether in a single payment or through agreed instalments, will still result in the CCJ being recorded on your credit file. However, it will be annotated as ‘settled,’ indicating to potential future lenders that you have fulfilled your debt obligation.
Can a CCJ force my company to pay its debts and what next steps could follow?
A CCJ, although a formal court order mandating debt payment, cannot directly compel you to settle the owed amount.
Instead, a CCJ often serves as a basis for additional measures, such as bailiffs visiting your premises or potential steps towards the compulsory liquidation of your company. Failing to pay an admitted debt communicates to creditors that your company may be insolvent, possibly triggering a winding-up petition (WUP) against your limited company.
If you suspect your company may be insolvent, it’s advisable to reach out to a licensed insolvency practitioner to evaluate your situation and explore potential options, including voluntary liquidation. Taking proactive steps is far more preferable than having a winding-up petition (WUP) imposed on your company.
How does CCJ affect my company?
A CCJ stays on your credit file for six years, significantly impacting your ability to secure competitive business funding during this period. Even if you don’t currently need external finance, these limitations could hinder your business plans for growth, expansion, updating crucial machinery or vehicles, and addressing cash flow needs in the future.
More worrisome is the impact a damaged credit file can have on the terms suppliers offer when doing business with you. Similar to any other creditor, suppliers might decline to provide credit to your company due to the CCJ. In such instances, negotiating alternative payment terms may be necessary, potentially requiring upfront payment for goods or services before delivery.
Consider the potential impact a CCJ could have on your company and its implications for your future goals. Seek professional advice from a licensed insolvency practitioner if you are worried about the continuity of your limited company’s operations or how to address increasing levels of distress.
How Does a CCJ Affect Me Personally as a Director?
A CCJ doesn’t make you personally responsible for your company’s debts. Nevertheless, as mentioned earlier, it can adversely affect the sustainability of your business, leading to various repercussions in your personal circumstances.
Take note that if your personal bank account is with the same bank as your company account, a CCJ can directly influence your business relationship with the bank. This may result in declined overdrafts and/or credit card applications. Furthermore, the income declared from your company could be perceived as unreliable or unstable, impacting your access to funds for personal use.
Read More:
- Bank Account Freezing Orders: Advice for company directors
- My business is making a loss – What are my options
- What is a personal guarantee
It’s Time To Wrap Up!
If your business faces the possibility of receiving a limited company CCJ, it’s crucial to take action promptly. Vanguard Insolvency can often identify solutions without resorting to court proceedings. There might be opportunities for funding and financing before the company’s credit rating is compromised, or we could assist in negotiating a Company Voluntary Arrangement.
Considering placing your company in Administration can create a legal barrier, shielding it from creditors and legal actions while you undergo reorganisation and restructuring. Various solutions exist for company cash flow challenges, and our expertise lies in helping you navigate them. Reach out for a free consultation to receive immediate assistance and advice.
With a partner-led service, our extensive office network spans over 100 locations throughout the UK, providing same-day consultations.
I am an insolvency professional with a distinguished career specialising in commercial insolvency, adeptly navigating Creditors Voluntary Liquidation, Company Voluntary Arrangements, and Company Administrations. With a comprehensive understanding of insolvency laws and an unwavering commitment to ethical practices.