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What Is a County Court Judgment (CCJ) Against a Company?
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What is a company County Court Judgment (CCJ)?
A County Court Judgment – or CCJ – is a court order which can be made to an individual or a company for non-payment of debt. For a company, this could be the first step towards the company being forced into compulsory liquidation if the debt in question is not dealt with as a matter of urgency.
How Does a CCJ Affect the Company and Its Directors?
A County Court Judgment (CCJ) is a county court order which can be made against a company to enforce debt which has gone unpaid.
Applying for a CCJ is a serious step creditors can turn to once all other methods of recovering the debt you owe them have been exhausted. A CCJ can have long-lasting ramifications on your business so it is important to know what a CCJ means and how having one can affect your company and also you as its director.
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How creditors obtain a CCJ against your company
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 you to pay but to no avail. If they are not satisfied that you want to or intend to pay your debts, they have the right to ask the court to issue a CCJ against your company.
The CCJ process will begin with the issuing of a County Court Summons. Typically, a business has 14 days in which to respond to the court, however, you are permitted to ask for an additional 14 days if this is required. If you don’t respond to the summons, or otherwise come to an alternative arrangement with your creditor for paying the debt, then the court will have no alternative but to issue the CCJ by default and record this against your company.
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Is it possible to stop the court from issuing a CCJ against a company?
It may be possible to stop the court from issuing a CCJ against your company if you have good reason to challenge it. This is known as a stay of execution.
If you do not agree with the amount the creditor is claiming you owe, or if you dispute the existence of the debt entirely, you are able to contest the impending County Court Judgment. This is done through the submission of form N244 along with any supporting documentation which must be done within the prescribed timeframe following notification that a creditor has filed for a CCJ.
If you are applying to have the judgment set aside via a stay of execution, then this process is likely to involve a court hearing which you must be in attendance for otherwise your challenge will be thrown. You will be asked to specify any dates you will be unavailable to attend a hearing on the application form. A court fee will also be payable unless you qualify for an exemption.
Is your company insolvent?
If your company is insolvent you have a number of legal responsibilities that you must adhere to. Taking steps to protect creditors from further losses by contacting a licensed insolvency practitioner can help ensure you adhere to these duties.
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What if I pay the CCJ amount in full?
If the debt is legitimate, the only way you can prevent the CCJ from being recorded on your credit file is to pay the full amount within 30 days of the judgment date. Fail to do this and the CCJ will remain visible on your credit record for the next six years.
If you pay after the 30 days are up, either in one lump sum or through a series of agreed instalments, the CCJ will still be recorded on your credit file but will be marked as ‘settled’ which shows potential future lenders that you have paid your debt.
Can a CCJ force my company to pay its debts and what further steps may be taken?
While a CCJ is a court order which formally orders you to pay your debt; in practice, it is unable to actually ‘force’ you to pay the money owed.
Instead a CCJ is sometimes used a platform for further action such as bailiffs visiting your premises, or even steps towards the compulsory liquidation of your company. Failure to pay a debt you admit you owe sends a strong message to your creditors that your company is in fact insolvent. This may lead to a winding-up petition (WUP) being issued which will kick-start the liquidation of your company.
If you do believe your company may be insolvent, you should contact a licensed insolvency practitioner to assess your situation and the potential ways forward. This may include entering into formal negotiations with your creditors by way of a Company Voluntary Arrangement (CVA), commencing a process of financial and/or operational restructuring through company administration, or bringing the business to an orderly end and placing it into voluntary liquidation.
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What are the effects of a CCJ on my company?
A CCJ will remain on your credit file for six years, and will undoubtedly affect your chances of accessing competitive lines of business funding during this time. While you may not require external finance currently, these restrictions could affect your business going forwards should you want to embark on a growth or expansion project, update machinery, vehicles or other key business assets, or even if you simply require assistance with cash flow.
Perhaps more concerning, however, is the affect a tarnished credit file could have on the terms suppliers enter into business with you. Just like any other creditor, suppliers may refuse to extend credit to your company in light of the CCJ. If this is the case you will have to negotiate alternative payments terms which may involve you having to pay up front for goods or services before they are supplied.
You should think carefully about the position a CCJ could place your company in and how this may affect your future ambitions. Ensure you take professional advice from a licensed insolvency practitioner if you are concerned about how your limited company will continue to trade or how to deal with mounting distress levels.
What effect does a CCJ have on me personally as a director?
While a CCJ will not make you personally liable for the debts of your company, it can have a detrimental effect on the viability of your business going forward which can have a number of knock-on consequences to your personal situation.
One thing you should be aware of is if your personal bank account is held with the same bank as the company account. In this instance a CCJ may directly impact your ongoing business with the bank such as refusal for overdrafts and/or credit cards. The income you declare from your company may also be viewed as unreliable or unstable, likewise affecting your ability to access funds for personal use.
Need to speak to someone?
If your company is struggling with unmanageable debts, squeezed cash flow, or an uncertain future, you are far from alone. We speak to company directors just like you every single day, and we are here to give you the help and advice you need.
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How Real Business Rescue can help
If your business is at risk 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. Call us for a free consultation for immediate help and advice. Our extensive office network comprises over 100+ UK Offices across the UK with a partner-led service offering same-day consultations.
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