What Happens if My Business has a CCJ?
A County Court judgment against a limited company is essentially a court order issued by a county court that enforces the payment of a debt.
This article will explore exactly what this means and what your options are in this situation.
What Does it Mean if a Limited Company Receives a County Court Judgment?
A County Court Judgment (CCJ) against your business means you must legally pay a disputed debt. This can have serious consequences, including:
- Bad credit rating: A CCJ will be on your credit report for six years, making it harder to get loans or good credit terms.
- Damaged reputation: Customers and business partners may be wary of doing business with you if you have a CCJ.
- Enforcement action: If you don’t pay the debt, the court may take action, such as seizing assets or freezing your bank accounts.
How do I Know if our Company has a CCJ?
If your company has a CCJ, you will receive a formal notice from the County Court informing you that a claim has been made against you for a debt. This notice outlines your options, including:
- Acknowledge the Claim: Within 14 days of receiving the notice, you must acknowledge the claim by submitting an acknowledgement of service form. This form is available online or at the court. Acknowledging the claim buys you an additional 14 days to file a defence.
- File a Defense: If you believe the claim is unjustified or inaccurate, you must file a defence within 14 days of acknowledging the claim or 28 days of receiving the original notice if you didn’t acknowledge it. A defence explains your reasons for disputing the claim.
- Default Judgment: If you fail to take either of these actions within the specified timeframes, the court will likely issue a default judgment against your company. This means the court will rule in favour of the claimant, and you will be legally obligated to pay the debt.
- Postal Notification: Regardless of your response to the claim, you will receive further postal notifications from the court regarding the progress of the case and the outcome.
Promptly addressing the claim and complying with court procedures is crucial to avoid a CCJ and its potential consequences. Consider seeking legal advice if you have any doubts or require assistance in navigating the legal process.
“Can a CCJ Force My Limited Company to Repay its Debts?”
A CCJ (County Court Judgement) against a limited company does not directly compel immediate debt repayment. It is the creditor’s decision to pursue further legal measures to enforce payment.
Directors often overlook the broader implications of a CCJ. While it cannot directly enforce debt repayment, a CCJ can initiate a chain of events leading to potential company liquidation. If the CCJ involves a debt of £750 or more, it can be grounds for starting winding-up proceedings. However, creditors often avoid this route due to high costs, unless the debt significantly exceeds £750 and there is a reasonable chance of recovering funds through company liquidation.
A CCJ can also adversely affect the company’s trading ability. It negatively impacts the company’s credit rating, and if you have provided a personal guarantee for business credit, it might also harm your personal credit score. This can hinder future financial assistance from banks and building societies, and trade creditors may become hesitant to extend credit, fearing exposure to your company’s debts.
How Long Does a County Court Judgement Last?
A County Court Judgment (CCJ) remains on your credit report for six years, unless you pay the full amount owed within one month of the judgment being issued. In the event of full payment within this timeframe, the CCJ will not be recorded on your credit report.
To ensure the removal of a CCJ from your credit report following full payment, it is crucial to provide the court with proof of payment, such as a certificate of receipt. Additionally, requesting a “Certificate of Satisfaction” from the court will formally document the settlement of the debt and further support its removal from your credit history.
Can a CCJ make Directors’ Personally Liable for Company Debts?
Directors are not automatically held personally liable for company debts following a County Court Judgement (CCJ). However, a CCJ indicating the company’s inability to settle its debts may signal insolvency. In such a scenario, directors are legally required to prioritise the interests of their creditors.
Should a director prioritise personal or company interests over those of the creditors post-insolvency, this could result in personal liability for the company’s debts due to wrongful trading. Essentially, while a CCJ alone does not transfer debt liability to directors, their actions following a declaration of insolvency, as evidenced by the CCJ, are crucial in determining personal liability.
Is there a way to Prevent the Court from Issuing a CCJ against my Company?
To prevent a court from issuing a County Court Judgement (CCJ) against your company, swift and proactive measures are essential. If you challenge either the amount claimed or the existence of the debt itself, promptly completing and submitting the required response forms to the court is crucial.
There are instances where a creditor may erroneously petition for a CCJ based on an incorrect debt amount or a non-existent debt. By either disputing the debt, settling it in full, or arranging instalment payments, your company can halt the court from proceeding with a CCJ. Timely action is the key to avoiding this legal consequence.
Failure to Pay a County Court Judgment (CCJ): Consequences and Enforcement Actions
Failure to comply with a CCJ can have severe consequences, including enforcement actions that can significantly impact your finances.
Creditors have various options to enforce a CCJ if payment is not made:
- Bailiffs: Bailiffs may be sent to your home or business to seize assets and sell them to recover the debt.
- Attachment of Earnings Order: Creditors can obtain a court order requiring your employer to deduct a portion of your wages directly to pay the debt.
- Third-Party Debt Order: This order compels your bank to freeze and pay funds from your account to the creditor.
- Charging Order: A creditor can secure the debt against a property you own, potentially leading to its sale if the debt remains unpaid.
- Winding-Up Petition: For company debts, a CCJ can lead to a winding-up petition, forcing the company’s liquidation if the debt is not settled within seven days.
What Should you do if your Business Receives a CCJ?
If your business has received a County Court Judgment (CCJ), here are your options:
- Read the CCJ Carefully: Understand the details, including the debt amount and payment deadline.
- Check Your Finances: Determine if your business can pay the debt.
- Get Legal Advice: Take advantage of a free consultation with the business debt team here at Company Debt.
- Act Quickly: If you agree with the CCJ, arrange to pay it promptly to avoid further issues.
- Dispute if Necessary: If the CCJ seems wrong, you can challenge it in court.
- Negotiate Payment Plans: If you can’t pay all at once, try to negotiate a payment plan with the creditor.
- Be Aware of Consequences: Not paying the CCJ can lead to more legal action and affect your business’s credit.
- Talk to the Creditor: Open communication can lead to more flexible payment options.
- Prevent Future Issues: Review your business’s credit management to avoid similar situations.
- Keep Stakeholders Informed: Depending on the situation, you may need to inform investors or partners.
Does a CCJ Against a Company Affect the Director?
A County Court Judgment (CCJ) against a company does not directly affect the personal credit rating of its directors unless they have given personal guarantees for the company’s debts. However, it can indirectly impact directors in several ways:
- Reputation: A CCJ against the company might affect its reputation, potentially impacting the directors’ professional standing.
- Future Financing: Directors may face challenges when seeking finance for the company, as lenders might view a CCJ as a sign of financial instability.
- Personal Guarantees: If a director has provided personal guarantees for company debts, a CCJ against the company could lead to personal financial implications for them.
It’s important for directors to manage company finances responsibly to avoid such situations.
How to Seek Assistance for Limited Company CCJ Issues?
If your limited company is facing the possibility of a County Court Judgement (CCJ), immediate action and expert guidance are crucial. Company Debt offers specialised assistance to navigate through such challenges, potentially avoiding court involvement. They can help explore various options like funding or invoice financing to generate necessary capital, or consider a Company Voluntary Arrangement (CVA) if it suits your situation better.
For detailed information and tailored advice, visit their dedicated County Court Judgement page. Alternatively, for a confidential conversation about your specific situation, you can contact an experienced turnaround practitioner at Company Debt by calling 0800 074 6757.