If a creditor has issued a county court judgement (CCJ) against your private limited company, you need to act quickly. Fail to do so and the CCJ could make it difficult to secure affordable finance and find suppliers that are willing to work with you in the future.
In this guide, we’ll discuss the potential impact if a country court judgement is issued against your limited company and explore the various options available to you.
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What Is A Ccj And Why Has It Been Issued Against My Company?
A county court judgement is a court order that has been registered against your company because it owes money to a creditor (e.g. a supplier, customer or HMRC) that you have not repaid. If a CCJ has been registered against your business, that means the court has formally decided that you owe the money. If you fail to stick to the terms that are set out in the CCJ, the creditor can ask the court to take measures to enforce the debt.
Importantly, creditors can only use CCJs once they have tried and failed with other methods of debt collection. So, you will have several opportunities to make the payment and contest the creditor’s claim before a county court judgement is registered against you.
How Do Creditors Obtain A Ccj Against Your Company?
A county court judgement is certainly not a quick fix for the creditor, so it will only be a route they choose to take if they have repeatedly tried to get you to repay the debt without success.
Once they’re satisfied that you cannot or do not intend to pay the debt, the first step for the creditor is to complete an online application form, which will ask for details about the circumstances of the claim. Once that has been submitted, you’ll receive a letter from the court setting out the details of the claim and asking you to complete a form to give your side of the story.
The county court will then decide whether there is a proven debt to pay. If the court sides with the creditor, you will have 14 days to agree to make the payment, dispute the claim or ask for a further 14-day extension. If you fail to respond, the CCJ will be registered in default against you. If you do not dispute the CCJ, you will have 30 days from the judgement to make payment in full or to arrange an acceptable payment plan with the creditor.
What Happens If You Refuse To Pay A Ccj?
If the CCJ isn’t paid within 30 days of the judgement date, it will stay on your company’s credit file for six years, which could make it difficult to run the business effectively. The creditor will also have a range of enforcement options available to them, which will typically start with bailiffs turning up at your door to recover the debt or to seize goods to sell at auction.
If the debt remains unpaid, the creditor could issue a winding up petition against your business. That will give you just seven days to repay the debt. The winding up petition will be heard by the court, and, if the court rules against you, a winding up order could be made and the company will be closed down via compulsory liquidation.
Does A Ccj Show On The Companies House Register?
Details of county court judgements registered against a company are not listed on the Companies House register. However, they are readily available to prospective lenders and suppliers. All they have to do is to search the Registry Trust, which provides access to the statutory Register of Judgements, Orders and Fines. They can also be viewed by running a check with a credit agency.
What Impact Could A Ccj Have On Your Credit Record?
If the court decides that the debt is legitimate and registers the CCJ against you, the only way to prevent the CCJ from being recorded on your credit record is to agree to pay the full amount within 30 days of the judgement date. That could be in the form of a single lump sum or a series of instalments that have been agreed with the creditor. Fail to do so and the CCJ will be recorded on your credit file for six years.
The presence of an unpaid CCJ on your credit file will make it difficult to access competitive lines of business funding. Although you may not plan to borrow any money at the moment, in the future, you may need to update vital machinery, purchase other key assets or boost your business’s cash-flow, and without access to competitive external finance, that could be very challenging.
What could be even more problematic for your business is the impact the CCJ has on the willingness of existing and new suppliers to work with you, and the credit terms they’re willing to offer. Suppliers may only work with you if you agree to pay for goods and services upfront, which will almost certainly affect your ability to grow the business.
What Happens If I Pay Off A Ccj?
- You make the payment within 14 days of receiving the claim form
If you do not dispute the debt and want to avoid any lasting damage to your company’s credit record, the simplest solution is to make the payment within 14 days of receiving the initial claim form from the court. If you make the payment in full (plus any interest and court fees), there will not be a court hearing and a CCJ will not be recorded against you.
- You make the payment within 30 days of the judgement date
Your next best option to limit the damage to your company’s credit report is to repay the full amount listed on the CCJ within 30 days of the judgement being issued. If you do, the CCJ will not appear on your credit report. However, the arrears and default that led to the creditor taking court action will remain on your report for six years from their date of issue. Although these markers will still affect your credit rating, the overall impact will be considerably less than if the CCJ was not repaid and remained active.
- You make the payment after 30 days of the judgement date
If you repay the CCJ after the initial 30-day period has expired, either in instalments or a single payment, the CCJ will be recorded on your credit report where it will remain for six years. Once you make the payment, the CCJ will be marked as ‘satisfied’, which will show potential creditors that it’s no longer active. Although it will still be difficult to access credit at the most competitive rates, it will look better than an unsatisfied judgement.
How Do I Contest A Ccj?
If you want to dispute the debt amount that’s being claimed by the creditor or contest the existence of the debt at all, you will have the opportunity to do so once you have received the initial notice from the county court. You will have 14 days to respond to the notice and let the court know that you intend to defend yourself.
At this point, you will have three options available to you. You can:
- Dispute the amount owed - If you think the debt amount on the claim form is inaccurate, you should send the claim form back to the court explaining why and include all the supporting information you have. You should also pay the money you do owe or ask for a 14-day extension. The court will then decide whether you or the creditor is right.
- Dispute the claim - If you don’t think you are liable for the debt, you should complete and return the defence form that will be sent to you within the claim form pack. You should set out the reasons why you are disputing the claim and include any supporting information.
- Make a counterclaim against the creditor - A company may feel it is owed money from the creditor, for example, if a customer withheld a proportion of the payment for services the company provided. In this case, you should complete and submit the counterclaim form that’s provided in the claim form pack.
If you intend to contest the debt, you must act early. If you fail to return the appropriate forms within the timeframe, a CCJ will be registered against your company in default and its credit score will be affected.
Once you have submitted the relevant form to contest the debt, a court hearing will usually need to take place, which you must attend. Fail to do so and your challenge will be thrown out by the court and the CCJ will be registered against you. You will be asked to specify the dates when you cannot attend the court when completing your claim form.
Can A Company Ccj Affect Your Personal Credit Score?
Generally speaking, a CCJ that’s registered against your company will not impact your personal credit score. However, there are circumstances where it may. If your personal and company accounts are held with the same bank, the bank may be reluctant to offer credit facilities such as a credit card, overdraft or personal loan to you as an individual.
If you have signed a personal guarantee to secure the debt that has become the subject of the CCJ, there will also be an impact on your personal credit score. However, potentially more damaging are the personal liability issues that could arise.
Can A Company Director Be Made Personally Liable For A Business’s Ccj?
One of the biggest concerns for company directors will be whether they could be made personally liable for the debts of the company. Ordinarily, a debt that’s subject to a CCJ will not be transferred from the company to a director personally. However, there are a couple of circumstances where the directors could be exposed.
- The director has signed a personal guarantee
If you have signed a personal guarantee for a debt that the company has not repaid and you do not have the personal funds to settle the debt, the creditor can apply for a writ of execution. That will give bailiffs the power to visit your property and seize personal assets to recover the debt. Alternatively, they could apply for a charging order to secure the debt against your home or even commence bankruptcy proceedings for debts of over £5,000.
- The director is accused of wrongful trading
The presence of an active CCJ on a company’s credit record is clear evidence that the company is unable to pay its debts and could be insolvent. When a company becomes insolvent, the directors are legally obliged to act in the best interests of their creditors. Fail to do so and the directors could be found guilty of wrongful trading, which could lead to personal liability for the debts of the company.
Is There A Ccj Against My Company?
Although it’s unlikely, it’s possible that a CCJ could be registered against your company without you knowing. This is particularly the case if you have changed your business address without informing your creditors. You can check whether you have any active CCJs or get an update on the status of existing judgements simply by checking your company’s credit report. That will provide you with details of:
- The date the CCJ was issued
- The full amount owed
- The unique court reference number
- Whether the judgement is active or satisfied
- Whether the judgement is disputed
- How long until the CCJ will be removed
- Which credit reference agencies are reporting the CCJ
Alternatively, you could contact the Registry Trust and for a small fee you will be told:
- The company name and its address
- The court reference number
- The date of the judgement
- Whether the debt has been satisfied
A Creditor Is Threatening My Company With A Ccj, What Can I Do?
If your limited company is being threatened with a CCJ, the time to act is now. If the company cannot afford to repay the debt, it could be insolvent. In that case, you should contact our team of insolvency practitioners immediately. They will assess your situation and often be able to find a solution without involving the court.
One option is to find a source of funding that the company could use to repay the debt before the company’s credit record is tarnished. Alternatively, we could help you negotiate a company voluntary arrangement (CVA) with your creditors, which will prevent legal action from being taken against you and allow you to repay your debts over time. Going into administration is another option we can consider. It will protect your business from legal action while you reorganise or restructure your business and can continue to trade.
Do You Need Help Protecting Your Business From A Ccj?
Then call 08000 24 24 51 or email firstname.lastname@example.org for a free and confidential consultation with our insolvency practitioners. There are several potential solutions available to help you avoid the damaging consequences of a CCJ and continue to trade.