A County Court Judgement, otherwise known as a CCJ, is an order made by the county court against a limited company for the repayment of a debt owed.
A CCJ will usually be the last resort by creditors who are owed money, once all other means of repayment have failed.
There can be a range of negative consequences for a company that is issued with a CCJ. Therefore, it is important that you know what it means to have a County Court Judgement issued against you and what steps to take next. In this guide, Clarke Bell explores more.
What is a County Court Judgement?
As we have mentioned, a County Court Judgement is made against a limited company by creditors that are owed money by the company.
A creditor will not usually apply to the court for a CCJ unless they have tried and failed to retrieve what they owe through several other means.
The process will be initiated by the issuing of a County Court Summons. Following this, the company then has 14 days to respond to the courts. At this stage, the company can ask for an extra 14 days if needed.
If the Country Court Summons is ignored, or if you cannot draw up an agreed repayment plan with the creditor, then the court will issue the County Court Judgement against the company.
Although a CCJ cannot actually force the company to repay its debts, it can be used as justification for further actions such as ordering bailiffs to visit the business premises in order to collect what is owed, or as justification for a winding-up order to be issued against your company, which will place it into compulsory liquidation.
To find out more about compulsory liquidation and the effects it can have on your business, check out our guide.
What options does my business have when issued with a CCJ?
One option for a company that has been issued a CCJ is to challenge the judgement. This is an option that should be taken if you do not agree with the amount the creditor is claiming they are owed, or if you disagree with the existence of the debt altogether.
To dispute the CCJ, the company director must fill out and submit the N244 form alongside any documents that support their claim. This must be done within the 14 day time period following the notification that a creditor has filed for a CCJ.
Where the director is disputing the debt and applying to have the County Court Judgement set aside, there will usually be a court hearing involved. The director must attend the hearing, or the challenge will be dismissed and you will be ordered to pay the amount owed.
The other option is to pay the amount stated in the CCJ in full. You must do this in 30 days of the judgement date.
Paying back the CCJ in full is the only way to stop it from being recorded on your credit file. This can be done in one sum, or through an agreed repayment plan through a number of instalments.
How does a CCJ affect my company?
Clearly, if a CCJ is issued against your company and is not paid within the specified time limit then there will be a number of consequents.
The first impact that this will have is that it will remain on your credit file for 6 years.
This can lead lenders to have a dim view on the company and will impact the chances that you will be able to successfully secure business funding, loans or other financial arrangements. Obviously, this can have a range of negative impacts on the development and growth of your business.
Likewise, external parties such as clients and suppliers may not wish to do future business with you going forward or may limit the terms to which you do business.
Will the director be personally affected?
Understandably, many directors will worry that they will be personally affected if their company is issued with a CCJ.
As a director of a limited company, you will be protected with limited liability. This is because the company’s finances and debts are separate from the director’s personal finances, meaning they can’t be made personally liable.
However, this is not the case if the director has signed any form of personal guarantee. Personal guarantees are often signed for by the director when they are securing funding for the business. It acts as a form of security for the lender in the case that the company cannot pay back the amount they are borrowing.
Therefore, if you sign a personal guarantee and are issued with a CCJ, your personal credit rating and finances can be badly impacted.
Similarly, if your personal bank account is with the same bank as the company account, a CCJ can impact your personal borrowing capacity with that particular bank which can affect your ability to lend on things such as a mortgage, overdraft or credit card.
If you have been issued with a CCJ Clarke Bell can help
If your company is facing the prospect of a County Court Judgement then it is important that you act quickly.
It will be beneficial to speak to an accountant or Insolvency Practitioner such as Clarke Bell as soon as possible. We have over 28 years’ experience working with insolvent companies, and will work with you closely to find the best route forward, whether that is Creditors’ Voluntary Liquidation (CVL), a Company Voluntary Arrangement (CVA) or a pre-pack administration.
Get in touch with Clarke Bell for free, initial advice on the options your business has, as well as the legal rights that creditors have during this time, and we will help get you on the right track.