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stay of execution
29 September 2021

Creditors who are owed money by a company and have had several repayment demands gone unfulfilled can apply for a County Court Judgement against the limited company as a means of recovering the debt.

When a limited company fails to pay a County Court Judgement, the creditor then has the right to gain assistance from High Court Enforcement Officers, widely known as bailiffs.

In such cases, bailiffs are utilised to seize assets belonging to the business, which can then be sold at auction to raise funds to repay creditors.

However, there are instances in which a limited can seek a stay of execution to stop this from taking place.

If your business is facing action from creditors and you want to know what your options are, Clarke Bell has put together this guide outlining how a stay of execution can help to rescue your business.

What is a stay of execution?

In instances where a limited company has been issued with a County Court Judgement, a stay of execution is designed to give the company time to reorganise its finances and stop action being taken against them.

This prevents the High Court Enforcement Officers from seizing company assets.

A stay of execution gives a company the time to either:

  • Reorganise their finances by either freeing up funds or raising the necessary funds to pay the debt
  • Make a formal dispute to the debt through the court
  • Apply to come to a formal repayment agreement with creditors through the court
  • Create an informal agreement with creditors and the High Court Enforcement Officers outlining when and how they will repay the debt in installments

Therefore, if action is being threatened against your business, a stay of execution can buy the company the precious time it needs to come up with an alternative and to stop its assets from being seized and sold.

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How to apply for a stay of execution

There are two main ways to apply for a stay of execution. Directors can use either forms N245 or N244.

Form N245 would be used in cases that the director wants to come to a formal agreement for repayment with the creditors through the court. For this reason, the director must supply a statement outlining company income and expenditure which must show how the company can repay the debt at the amount suggested.

On the other hand, the N244 form should be used when the director disputes the debt. In this instance, a court hearing will usually follow where both parties can present their cases before a final decision is made.

It is important to realise that simply applying for a stay of execution doesn’t automatically mean that the County Court Judgement proceedings stop.

Throughout the application process, the debt is still considered to be active. This means that there is still the chance that bailiffs can visit your premises, meaning you should have a copy of the stay of execution application to hand to show them in this instance.

It is worth noting that directors also have the option to request an interim stay of execution. This can be applied for through the small claims court and will protect your business against action being taken against it until the court has reached its decision on your application.

What happens when a stay of execution is granted?

If the stay of execution is granted, what happens next will depend on the circumstances at hand.

If you have disputed the debt using form N244 then the County Court Judgement will be suspended temporarily and a full court hearing will be carried out. This will need evidence to be brought forward from both the debtor and the creditors.

If you have submitted your application through an N256 form and it is granted, then the director must make the agreed repayments in full and on time. If you fail to make repayments then the bailiffs will be granted the power to seize the businesses’ assets in order to cover the debt.

What happens if a stay of execution is not granted? 

In the case that the stay of execution application is refused, the company is then legally obliged to repay the debt amount back in full immediately.

If this isn’t possible, it will be time to consider what other options are open to your business, namely Creditors’ Voluntary Liquidation (CVL.)

Creditors’ Voluntary Liquidation

A CVL allows a director to voluntarily place their company into liquidation. This properly and legally deals with the company’s assets and liabilities and ensures that the director is meeting their obligations towards creditors to which they owe money.

By putting the company through Creditors’ Voluntary Liquidation, directors will also remove the risk that they will be accused of wrongful trading, giving you much-needed peace of mind.

Although this results in the company being closed and struck off the Companies House register, this ensures that you are dealing with your debts in the correct way and are facing your responsibilities towards creditors.

What’s more, this is a cost-effective way to close a business and ensures that every asset and liability is dealt with in the right manner.

To find out more about Creditors’ Voluntary Liquidation and why you would need to go through the process, check out our useful guide.

Get help from Clarke Bell

If your company is insolvent then you must seek insolvency advice as soon as possible. The quicker you get help, the more options will remain open to you.

Whether you are facing the first signs of financial hardship or are considering a CVL, Clarke Bell can help you with the next steps.

Clarke Bell has over 26 years’ experience helping directors and are experts at guiding directors through the liquidation process. For more information about our CVL service or to get some free initial insolvency advice, simply contact us today to speak to one of our friendly team members.

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If you are worried about your business or just want a (free) no obligation chat, contact Clarke Bell on 0161 907 4044 or [email protected] today. Our Licensed Insolvency Practitioners will provide you with the best professional advice for your situation.

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