If your business has received a County Court Judgment (CCJ), it is important to take action as soon as possible. A CCJ is a court order that requires you to pay a debt that you owe to a creditor.
If you do not pay the debt, the creditor may be able to take further legal action to recover the money, such as applying for a charging order on your property or garnishing your wages.
To avoid these consequences, you should try to come to an agreement with the creditor to pay off the debt. This may involve negotiating a payment plan or offering to pay a lump sum to settle the debt.
You should also make sure to keep a record of all communication and payment agreements with the creditor.
If you believe that the CCJ is incorrect or you have a valid defense against the debt, you may be able to challenge the judgment. This can be done by filling out a form called a “Notice of Objection” and submitting it to the court. You will need to provide evidence to support your challenge, and it is recommended to seek legal advice before proceeding.
In summary, if your business has received a CCJ, it is important to take action promptly to avoid further legal consequences. This may involve negotiating a payment plan with the creditor or challenging the judgment if you believe it is incorrect.
How Does a CCJ Affect a Limited Company?
A County Court Judgment (CCJ) can have significant consequences for a limited company. A CCJ is a court order that requires a company to pay a debt that it owes to a creditor. If the company fails to pay the debt, the creditor may be able to take further legal action to recover the money, such as applying for a charging order on the company’s property or garnishing the wages of company directors.
Having a CCJ can also affect the company’s credit rating, which may make it more difficult for the company to obtain loans or credit in the future. It may also be more difficult for the company to lease or purchase property, as landlords and sellers may be hesitant to do business with a company that has a CCJ on its record.
In addition, a CCJ may cause the company to lose credibility with customers and business partners. This can lead to a decline in business and financial struggles for the company.
It is important for a limited company to take action to resolve a CCJ as soon as possible to avoid these negative consequences. This may involve negotiating a payment plan with the creditor or challenging the CCJ if the company believes it is incorrect.
How creditors obtain a CCJ against your Company
Creditors can obtain a County Court Judgment (CCJ) against a company if the company owes them money and has not paid it back. To obtain a CCJ, the creditor must first send a letter of claim to the company, outlining the details of the debt and giving the company an opportunity to respond. If the company does not dispute the debt or come to an agreement with the creditor to pay it off, the creditor can then file a claim with the court.
The court will review the claim and, if it determines that the company does indeed owe the debt, it will issue a CCJ. The creditor will then be able to take legal action to recover the money, such as applying for a charging order on the company’s property or garnishing the wages of company directors.
It is important for companies to keep track of their debts and try to resolve any disputes with creditors as quickly as possible to avoid the possibility of a CCJ being issued against them.
Will a CCJ affect my Limited Company’s Credit Rating?
If you pay, or ‘satisfy’ the CCJ within 30 days of the judgement’s issuing, the CCJ won’t appear on your company’s credit file. However, if you are unable, or fail to pay the amount within the specified time limit, the CCJ will appear on your company’s credit file for the next six years. During that time, your credit rating will suffer, making it more difficult to apply for business loans or other financial arrangements. Lenders will be reluctant to deal with businesses with a poor credit rating as, in their view, it reflects your ability to repay what you’ve borrowed.
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.
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 effect could a CCJ have on your Company?
Unfortunately, if your creditor has made several attempts to recoup what is owed, and you have either been unable or unwilling to meet their demands, they may take further action.
The following is a general outline of what could happen if a creditor involves the courts:
- A County Court Summons is issued by your creditor in an attempt to recover their debt
- You have 14 days in which to respond, and can request a further 14-day extension period
- If further attempts at negotiation are unsuccessful, or no response is made and the court agrees that the debt is valid, a County Court Judgment will be issued against your company
- At this point, you have 30 days in which to pay the debt in full, otherwise the court will officially register the CCJ and inform credit reference agencies
- Not paying within the 30-day period validates the creditor’s claim for their money and provides proof that your company is in an insolvent position
- This may result in them taking further action in the form of a winding up petition, which could quickly lead to compulsory liquidation and closure.
Clearly, there is a need to act quickly if a CCJ is threatened. You need to complete and return the court paperwork as soon as possible. If informal negotiations with your creditor are unlikely to be successful within the 14-day period, or you are going to dispute the debt, you should seek professional advice. A range of formal insolvency solutions exist that could save your company.
To stop a judgement being issued against the company, you must follow the requests on the order. You have 14 days to respond, fill in and return the necessary paperwork. The claim gives the company a chance to pay back the debt, request more time to pay or appeal the judgement with supporting information. If you do not respond to the order, the CCJ will be issued as a default judgement by the court and/or bailiff action can occur. This is not good and will be marked on the business’s credit report.
Unfortunately, you cannot reverse an order once it has been issued. However, there is still time for you to stop a winding up petition. i.e. pay once you receive the CCJ or else a winding up petition will be ordered (for debts over £750).
I’m Unable to Repay the CCJ
If you can’t repay the CCJ in full amount ordered within 28 days of judgment, the Judgment will be registered on the business’ credit file. The creditor will also be able to apply to enforce the debt by way of a warrant for a bailiff / enforcement officer to attend your premises.
You can delay any bailiff action, and also request that the judgment debt be payable over a period of time by completing Form N245, and paying a court fee, currently £50. The court will then decide whether to accept your suggested instalments or not.
The benefit of Form N245 is that it will give you breathing space from bailiffs until your creditor considers your offer, and the court makes a final decision. Once the court issues a decision, unless they agree to installments, you will again be at risk of further enforcement action.
How can Repayment Enforce take Place?
There are various methods of enforcing a CCJ which a successful Claimant can employ, but first the company debtor must have been given the opportunity to pay the judgment debt and either have failed to pay the whole amount by the date specified in the CCJ, or have failed to pay an instalment due under the terms of the CCJ. Unless a particular time for payment is specified, the general rule is that it should be paid within 14 days of the CCJ being given.
Is there a Time Limit for Enforcement?
Not as such, no. However, delay can have consequences and typically the sooner enforcement action is taken on an unpaid judgment debt, the better. For some methods of enforcement, you will need the permission of the Court to enforce if six years have passed since the judgment was given.
A judgment creditor will act quickly in order to ensure that assets are not dissipated by the debtor. Freezing injunctions are often a useful tool to ensure that an individual or company’s assets are not put out of a creditor’s reach.
How is Enforcement Used?
Popular CCJ enforcement methods where the debtor is a company include (but are not limited to):
Third Party Debt Orders
Where the judgment debtor is owed money by a third party, those funds can be seized from the third party for your benefit. This method is particularly useful where there is a supply chain and your judgment debtor is owed money by a company further up the chain. It means that you can essentially cut out the middle man and go straight to the top of the chain.
We looked previously at insolvency proceedings as a method of recovering debt from a company. They can also be used as an effective enforcement method where the judgment debt is £750 or more. If a winding up order is made, the judgment debtor’s assets will be realised by a liquidator and the funds distributed to the creditors. One effect that a winding up order has is to freeze the assets (including the bank accounts) of a debtor company.
Taking control of goods
If a debtor company has goods of a significant value (for example, machinery, computers or stock), you can issue a warrant (or writ in the High Court) of control, which directs an enforcement officer to take control of and sell a judgment debtor’s goods to raise funds to satisfy the debt. These goods must not be exempt goods or belong to a third party.
A charging order is a way of securing a judgment debt by imposing a charge over a judgment debtor’s land, securities or certain other assets. In terms of land, a charging order would usually prevent the judgment debtor from selling the land without paying what is owed to you. If the company does not sell the land, you can apply for an order for sale of the property.
Does this situation Affect you Personally as a Company Director?
If you are running a Limited company, a CCJ will affect your business’ credit rating, but your personal credit rating should remain intact unless:
- you have made a personal guarantee against the amount
- your personal funds are held in the business account
In these cases, your income will be deemed unreliable, creating subsequent personal issues.
Also, County Court Judgements stay on a publicly available record called Companies House, so the situation is liable to damage your company’s reputation and possibly your trustworthiness as a director of future ventures.
Read more: Removing a CCJ from your credit file
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With over three decades of experience in the business and turnaround sector, Steve Jones is one of the founders of Business Insolvency Helpline. With specialist knowledge of Insolvency, Liquidations, Administration, Pre-packs, CVA, MVL, Restructuring Advice and Company investment.