What Happens When Your Business Gets a CCJ?

With 126,618 issued in 2023, county court judgments are a pressing concern for many UK businesses.

I’ll explain what CCJs mean legally for your company, how they affect your operations, and what steps you can take if faced with one.

What Does it Mean if a Limited Company Receives a County Court Judgement?

A County Court Judgment (CCJ) is a formal court order issued under the County Courts Act 1984^[1]Trusted Source – GOV.UK – County Courts Act 1984. It represents a legal declaration that your limited company owes a specified sum of money to a creditor.

The process typically unfolds as follows:

1. A creditor issues a claim for an unpaid debt.
2. Your company receives a claim form, giving you 14 days to respond.
3. If you don’t respond or fail to reach an agreement, the court issues a CCJ.

Once issued, a CCJ requires your company to repay the debt either immediately or through instalments. You should also be aware that a CCJ is entered on the public Register of Judgments, Orders, and Fines^[2]Trusted Source – GOV.UK – The Register of Judgments, Orders and Fines Regulations 2005, which is accessible to credit reference agencies and potential creditors.

From a legal standpoint, a CCJ doesn’t immediately threaten your company’s existence. However, it does signal financial difficulty and can lead to more severe consequences if not addressed promptly.

Company director? Then take advantage of a free consultation

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?

If your company has a CCJ, you will receive a formal notice from the County Court informing you that a claim has been made against you for a debt.

You can search the Register of Judgments, Orders, and Fines, a database containing records of CCJs issued against companies and individuals. For a fee, you can search by company name or number. The Registry Trust Limited maintains this register on behalf of the Ministry of Justice.

A third option is to check your credit report. Any CCJs issued against your company will appear on reports from major credit reference agencies like Experian, Equifax, and TransUnion.

“Can a CCJ Force My Limited Company to Repay its Debts?”

Yes, a County Court Judgment (CCJ) is a legally binding order compelling your company to repay what it owes by a specified time (generally 14 days from the date of the judgment.)

Key points to understand:

1. A CCJ creates a legal obligation for your company to repay the debt according to the terms set out in the judgment.
2. If you don’t comply with the CCJ, creditors gain court-enforced powers to pursue your company’s assets and revenue streams. These may include:
   • Instructing High Court Enforcement Officers to seize company assets
   • Applying for a charging order on company property
   • Requesting a third-party debt order to freeze company bank accounts
3. A CCJ eliminates any possibility for your company to simply ignore or avoid repaying the debt.
4. If the CCJ debt remains unsatisfied, creditors can petition the court to wind up and forcibly liquidate your limited company under the Insolvency Act 1986. This is often considered a last resort but represents a very real threat to your company’s existence.
5. As a director, you have a legal duty under the Companies Act 2006 to act in the best interests of the company and its creditors when facing financial difficulties.

How Long Does a County Court Judgement Last on Your Credit Report?

A County Court Judgment (CCJ) remains on your credit report for six years unless you pay the full amount owed within one month of the judgment being issued. If you pay the full amount within this timeframe, the CCJ will not be recorded on your credit report.

To ensure the removal of a CCJ from your credit report following full payment, it is crucial to provide the court with proof of payment, such as a certificate of receipt. Additionally, requesting a “Certificate of Satisfaction” from the court will formally document the settlement of the debt and further support its removal from your credit history.

Can a CCJ make Directors Personally Liable?

Directors are not automatically held personally liable for company debts following a CCJ. However, if the company’s inability to settle its debts signals insolvency, directors must prioritise creditors’ interests. Failure to do so can result in personal liability for the company’s debts due to wrongful trading.

Is There a way to Prevent the Court from Issuing a CCJ Against my Company?

Yes, there are steps you can take to try to prevent the court from issuing a County Court Judgment (CCJ).

Firstly, it’s paramount to respond within the specified timeframe (usually 14-28 days). Ignoring the claim will result in a default CCJ being issued against you.

If you have grounds to dispute part or all of the debt claimed, you could also file a defence outlining your reasons, but you’ll need legal counsel for this course of action. This will prevent a CCJ until the matter is heard in court.

What Options Do You Have If Your Company Receives a CCJ?

When your company is served with a County Court Judgment (CCJ), you have several courses of action available. It’s crucial to understand each option and its implications for your business.

Repay the CCJ Within 30 Days

If your company has the financial means, settling the CCJ within 30 days of issuance is often the most advantageous option. By doing so, you can significantly mitigate the long-term impact on your company’s credit rating.

Once paid, the judgment will be marked as satisfied on your credit file, effectively neutralising its negative effects.

Negotiate a Repayment Plan Beyond 30 Days

Should immediate full payment prove challenging, you should contact the creditor to negotiate a repayment plan. Propose a realistic repayment schedule that your business can consistently meet.

While the CCJ will remain on your credit record during repayment, it will be marked as satisfied once you’ve cleared the debt in full.

Apply to Have the CCJ Set Aside

If you have grounds to believe the CCJ was issued erroneously, you may apply to have it set aside. This process involves submitting a formal application to the court, accompanied by compelling evidence that supports your claim of the judgment being unfair or incorrect.

Should your application prove successful, the CCJ will be removed from your company’s credit file. However, it’s important to note that this option requires a strong case and typically requires professional legal support.

Consider Formal Insolvency Procedures

If negotiations with your creditor reach an impasse, you may need to explore more structured solutions. One such option is a Company Voluntary Arrangement (CVA), a formal insolvency procedure that can offer your business a lifeline.

A CVA allows your company to repay debts over an extended period, typically three to five years, under legal protection. This arrangement is particularly beneficial if your business is viable but struggling with temporary cash flow issues. Under a CVA, you’ll work with an insolvency practitioner to propose a realistic repayment plan to your creditors.

Does a CCJ Against a Company Affect the Director?

A County Court Judgment (CCJ) can indirectly impact directors in several ways:

1. A CCJ against the company might affect its reputation, potentially impacting the directors’ professional standing.
2. Directors will face challenges when seeking finance for the company, as lenders view a CCJ as a sign of financial instability.
3. Lenders and business partners may view the company as a higher risk, leading to increased scrutiny and potentially unfavourable terms.

Expert Advice When You Need It

If your limited company is facing the possibility of a County Court Judgement (CCJ), immediate action and expert guidance are essential.

Company Debt offers specialised help for debt challenges via practical, jargon-free advice. We can help explore various options like funding or invoice financing to generate necessary capital or consider a Company Voluntary Arrangement (CVA) if it suits your situation better.

References

The primary sources for this article are listed below, including the relevant laws and Acts which provide their legal basis.

You can learn more about our standards for producing accurate, unbiased content in our editorial policy here.

1. Trusted Source – GOV.UK – County Courts Act 1984
2. Trusted Source – GOV.UK – The Register of Judgments, Orders and Fines Regulations 2005