Most of the time, operating a business as a limited liability company can protect directors from personal liability when debts are not paid, but this is not always the case. Many of our clients have come to us concerned with what a county court judgment (CCJ) can do to the company as well as the directors. We are asked, “My company has a county court judgment (CCJ), what can I do?” Unfortunately, you should have acted before the actual CCJ was issued, but since the courts have already made a judgment, it is important to know what this means and how it can affect the company and its directors.
Generally a creditor will not apply to the court for a CCJ unless you are severely delinquent in paying your debts and they have tried repeatedly to get paid. However, if they have not been satisfied that you want or intend to pay your debts, they have the right to ask the court to issue a county court judgment that will order you to pay your debt. Typically, a business has 14 days in which to respond to the court through the necessary paperwork, but if more time is needed there are also forms you can submit to ask for an additional 14 days. If you don’t respond, the court will undoubtedly issue the CCJ and this can affect the company and directors in a number of ways.
Here is the problem which many UK companies fall prey to since a CCJ cannot ‘force’ you to pay your debts. What is really at stake here goes well beyond being forced to pay debts because this could be the preliminary step towards a creditor seeking to wind up your company. Also, the judgment is, indeed, reported and will reflect on the company’s credit rating and often on the director’s credit score as well. (It depends on whether or not the director gave a personal guarantee to obtain credit, amongst other factors.) Future financing (loans) could be denied because there a CCJ against a company and many suppliers may be unwilling to extend credit as well. If the owner/director does business at the same bank as the company, a CCJ may also directly impact future business with the financial institution such as refusal for overdrafts and/or credit cards.
I am Keith Tully and I am a Partner at Real Business Rescue, I have seen every possible company scenario and am happy to help you where I can, please feel free to call me on my personal mobile 07857 032 528.
As we briefly mentioned above, it may be possible to prove your case and stop the court from issuing a CCJ against a company. If you dispute the amount which is owed or that you owe anything at all, the proper forms must be submitted within the prescribed timeframe after you have received notification by post that a creditor has filed. Sometimes a creditor has issued a CCJ against wrong company debts, and this is not as uncommon as you might believe! After all, even your creditors are human and can make unintentional errors as well. The key is to act immediately upon notification to either pay the amount in full, make arrangements for instalments or dispute the claim altogether.
If you are in jeopardy of being issued a limited company CCJ, the time to act is now. Real Business Rescue can often find a solution without involving the court. Perhaps funding and financing would be available before the company’s credit rating is tarnished or perhaps we could help to negotiate a Company Voluntary Arrangement. You may want to consider placing your company in Administration to draw a ringfence around it, protecting you from creditors, whilst you reorganise and restructure. There are a number of solutions to company cash flow problems and we are expert in helping you find them. Call us for a free consultation before you receive notification in the post that a creditor is seeking a county court judgment.
Our extensive office network comprises 55 offices across the UK with a partner-led service offering immediate director advice.
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