County Court Judgements (CCJ) – What is the Impact on You & Your Business?
A County Court Judgement against a limited company is essentially a court order, issued by a county court, that enforces the payment of a debt.
If a creditor has taken reasonable steps to recover a debt, they may then apply for a County Court Judgement. The court will then decide whether there is a debt to pay and, if the debt can be proven, the court will issue a CCJ.
A business will typically have 14 days to respond to the CCJ by completing the necessary paperwork. If more time is needed, it is also possible to ask the court for a 14 day extension.
If you fail to respond to the court, it will undoubtedly issue the CCJ. This can have a dramatic effect on your business and your position as a company director.
If your feel your company debt is pushing you towards insolvency, please reach out to us for a consultation about your situation.
NB: We are insolvency practitioners not lawyers, so we can’t help with contesting or removing CCJ’s.
How do I Know if our Company has a CCJ?
The County Court will send you a notice informing you that someone has made a claim against you for a debt. This will give you 14 days to let the court know whether you intend to defend yourself. If you do not file an acknowledgment of service (which buys you an additional 14 days to file a defence) or file a defence the court will issue a judgement against you by default, and if this happens you will again receive postal notification.
“Can a CCJ Force My Limited Company to Repay its Debts?”
The short answer is not immediately. The simple fact a CCJ is registered against your business does not mean it will be enforced. It is up to the creditor to decide whether to invest further time and money using additional court processes to try and force you to actually pay.
However, one of the mistakes company directors often make is to fail to take into account the long term impact of a County Court Judgement. A CCJ cannot actually force the company to repay its debts. However, it may represent the start of a slippery slope which can result in the winding-up of your company.
Once a CCJ has been made this alone can be used to start winding up proceedings, if the debt is £750.00. However, many creditors do not pursue this option as it is very expensive for them unless the debt is a lot more than £750.00 and they believe they have some prospect of recovering some money if your company is wound up.
There are also a number of other aspects of a CCJ which can make it increasingly difficult to trade. The judgement will undoubtedly reflect poorly on the company’s credit rating; however, it can also detrimentally impact your personal credit score if you gave a personal guarantee to secure the credit.This will make it difficult not only to secure future finance from banks and building societies, but trade creditors will also be increasingly reluctant to offer company credit if they become concerned about your limited company debts.
How Long Does a County Court Judgement Last?
CCJ’s stay on official records for six years, unless you pay the full amount within one month of the court judgement, in which case it will not be recorded. Ensure you show the court your certificate of receipt, and request a ‘Certificate of Satisfaction’ from them.
Can a CCJ make Directors’ Personally Liable for Company Debts?
When a company enters insolvency, the directors become legally obliged to act in the best interests of their creditors. Failure to do so can lead to the director being held personally liable for the debts due to wrongful trading.
While the CCJ alone cannot make a director personally responsible for the company’s debts, it does provide clear evidence that the company is unable to pay its debts, and is subsequently insolvent. From this point, if the director acts in their own or their company’s best interests, rather than in the interests of creditors, they may then be held personally liable for the company’s debts.
Is There a way to Prevent the Court from Issuing a CCJ against my Company?
If you dispute the amount your company owes, or dispute the existence of any debt at all, you must complete the appropriate forms within the allotted time frame and submit them to the court. It is not uncommon for a creditor to petition for a CCJ citing an inaccurate debt amount, or the wrong debt altogether.
The key is to act early. Whether you dispute the debt amount or agree to pay the amount in full, or make arrangements to pay the outstanding sum in instalments, it is possible to stop the court issuing a CCJ.
What happens if I Don’t pay the CCJ?
A CCJ is a serious matter so if you don’t pay it, you should expect the situation to escalate quickly towards some kind of enforcement action. This can mean bailiffs will turn up at your door. Other options available to creditors include:
An attachment of earnings order – where the creditor obtains details if your employment and obtains a court order that your employer must pay a portion of your earnings directly to the creditor until the debt is paid off.
A Third Party Debt Order – This is an order to your company bankers to pay the debt from funds they hold for that account..
A Charging Order – This is another way of making your debt more serious because it secures the debt against a property owned by your business (if any). If you do not pay back your debt once a charging order has been made, the creditor can apply for an ‘order for sale’, which will force you to sell the property
A Winding up Petition – If the CCJ has been made to enforce a company debt, it is a common precursor to a Winding up Petition, which is the most serious threat any company can face. If you receive a Winding up Petition, you will have just seven days to clear your debt or your company will face forcible liquidation.
Where can you find help with Limited Company CCJ’s?
If your business is at risk of being issued a County Court Judgement, the time to act is now. Expert assistance from Company Debt. can help you find an appropriate solution without the involvement of the court. Funding or invoice financing to raise the capital you need might be the most appropriate solution in your case. Alternatively, perhaps a Company Voluntary Arrangement (CVA) is the best solution for you.
For more information, please take a look at our dedicated County Court Judgement page, or give us a call on 0800 074 6757 for a confidential discussion of your circumstances with an experienced turnaround practitioner.