If you’re a company director and your business is struggling with debts to creditors, then it’s important to understand how a County Court Judgment (CCJ) can affect your business.
This article will explain what County Court Judgements are, and the effects it can have on your limited company’s credit file, access to finance, and ability to trade in future.
What is a County Court Judgment (CCJ)?
A CCJ is a court order and legal judgment that is issued by a county court following the failure to repay a debt.
If your company owes money to creditors and continually fails to repay, they can apply for a CCJ against you in order to force you to repay what you owe.
When you receive a CCJ, it acts as a county court summons; you’ll be expected to appear at a court hearing, and if the judge sides with your creditors, the court will order you to repay the debt by a certain date that they decide.
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How does a CCJ affect a limited company?
A County Court Judgment (CCJ) can have a significant impact on a limited company. A CCJ is a legal order that can be issued by a county court against a company that has failed to repay a debt.
The CCJ will require the company to pay the outstanding debt within a certain timeframe or face further legal action.
One of the most immediate and tangible impacts of a CCJ on a limited company is the effect it can have on the company’s credit rating.
A credit rating is a measure of a company’s creditworthiness and is used by banks, lenders, and other financial institutions to assess the level of risk associated with lending money to the company.
When a limited company is issued with a CCJ, it will be recorded on the company’s credit file, as well as a public record called Companies House Register.
This can have a negative impact on the company’s credit rating, making it harder for the company to access credit in the future. This is because lenders are likely to view the company as a higher risk, and may therefore charge higher interest rates or be more hesitant to lend money altogether.
What options do I have if my company receives a CCJ?
If your company receives a County Court Judgment (CCJ), there are several options available to you:
Repay the County Court Judgment within 30 days
If you are able to pay the outstanding debt within 30 days of the CCJ being issued.
When you pay the CCJ within one calendar month, the judgment will be marked as satisfied on your credit file, and the CCJ will not have a long-term impact on the limited company’s credit rating.
Repay the CCJ beyond 30 days
If you are unable to pay the outstanding debt within 30 days, you should contact the creditor to negotiate a repayment plan.
It’s important to be honest about your financial situation and work out a plan that you can realistically stick to. If you can agree on a repayment plan, the CCJ will remain on your credit record, but it will be marked as satisfied once the debt is repaid in full.
Apply to have the CCJ set aside
If you believe that the CCJ was issued in error, you can apply to have it set aside. This involves submitting an application to the court, along with any supporting evidence you have to show that the judgment was unfair or incorrect.
If the application is successful, the CCJ will be removed from your company credit file.
What happens to a limited company that refuses to repay a CCJ?
If a limited company refuses to repay a County Court Judgment (CCJ), it can have serious consequences for the company and its ability to continue operating.
Here are some of the potential outcomes:
Damage to company’s credit file
If the company fails to pay a CCJ within the specified time frame, it may be recorded as unsatisfied on the company’s credit file, which will have a negative impact on the company’s credit rating.
This can make it harder for the company to access credit in the future and could damage the company’s reputation.
Seizure of business assets
If the CCJ remains unpaid, the creditor may seek to enforce the judgement by taking action to seize the company’s assets.
This could include seizing goods, equipment, or property owned by the company in order to pay off the outstanding debt, threatening the company’s ability to operate. It may eventually result in the company going out of business.
Potential winding up petition
In the most severe cases, the creditor may seek to wind up the company in order to recover the debt owed.
This involves petitioning the court for a winding-up order, which can result in the the compulsory liquidation of the company. Its assets can subsequently be sold to pay off the outstanding debt.
A winding up petition can have a devastating impact on the company’s employees, shareholders, and other stakeholders.
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How long does a CCJ stay on a company’s credit file?
A County Court Judgment (CCJ) will remain on a company’s credit file for six years from the date it was issued, even if the debt has been paid in full.
This means that during this period, the CCJ will be visible to anyone who checks the company’s credit file, including lenders, suppliers, and other organizations.
Once the six-year period has elapsed, the CCJ will be automatically removed from the company’s credit file, and will no longer be visible to potential lenders or other organisations.
It’s worth noting that if the debt is not paid in full within the specified time frame, the CCJ may be recorded as satisfied or unsatisfied, which could affect the company’s credit rating.
Can you get credit with a County Court Judgement against your business?
It is possible to get credit with a County Court Judgment (CCJ) against your business, but it can be more challenging, particularly if the CCJ has been recently issued and is still recorded on your credit file.
Personal guarantee
One option is to provide a personal guarantee for the credit you are seeking. This involves a director or shareholder of the business agreeing to take responsibility for the debt if the company is unable to repay it, up to and including using their own personal fund to repay liabilities.
This can provide lenders with an added level of security, and may increase your chances of being approved for credit.
Improving your poor credit rating over time
Another option is to work on improving your credit rating over time. This may involve taking steps to address any outstanding debts, paying bills on time, and being vigilant about keeping your credit file up to date and accurate.
It’s worth noting that even if you are able to secure credit with a CCJ against your business, you may be charged higher interest rates or fees than you would otherwise. This is because the lender is taking on additional risk by extending credit to a business with a CCJ on their record.
Can I be a company director with personal County Court Judgements?
Yes, it is possible to be a company director with a personal County Court Judgment (CCJ). There is no legal restriction preventing people with CCJs from acting as company directors for a limited company.
Because a limited company is a separate legal entity, it has no legal attachment to you, your personal funds or finances.
That said, if your limited company receives a CCJ and you as a company director are asked to offer a personal guarantee to creditors, holding a personal CCJ is likely to make it more difficult to secure credit.
Where can I get debt advice I owe money to creditors?
It’s important to take action as soon as possible if your company receives a CCJ, as ignoring the judgment can have serious consequences, such as damage to your credit rating and seizure of business assets.
If you’re worried about your personal debts, the threat of a CCJ, or whether a CCJ could stop you from owning a business, we can help.
At Your Debt Expert, we specialise in reliable debt advice and practical debt solutions. For more information on how you can deal with your debts, get in touch with one of our advisors today.
