County Court Judgments: A Directors Guide

November 9, 2023 / News & General

Creditor pressure is something experienced by many companies with outstanding debts. Oftentimes, this pressure is warranted and is the result of companies failing to make scheduled repayments for one reason or another. Other times, it is the result of impatient creditors that might be a little more pushy than necessary. No matter the reason, creditor pressure is something to take seriously. Left unchecked, it can sour the relationship between a company and its creditors, pave the way to escalations, and possibly culminate in a County Court Judgment.

Creditors can utilise County Court Judgments (CCJ) as a means of enforcing repayments. Once served, they can cause a range of problems for companies, from reputational damage to allowing more serious attempts at debt collection. If your company has received a CCJ, it is crucial you consider your options and act swiftly.

In this article, Clarke Bell provides a complete guide to County Court Judgments, how they work against limited companies, and what you can do in response.

If you want to sort your company debt problems, once and for all – then give us a call on 0161 907 4044.

What is a CCJ?

A County Court Judgment is a document issued to a company by a court on behalf of creditors. This document orders the full repayment of a debt, which may be registered against a company after repeated repayment failures. A CCJ often marks the first step in more forceful attempts at debt collection and can culminate in a winding-up petition and compulsory liquidation if left unaddressed.

What does receiving a CCJ mean for a limited company?

Receiving a CCJ is essentially an ultimatum for a company: either repay the specified debt in full or risk further action. Depending on the actions of the company, the CCJ can branch into two sets of consequences.

Assuming the company abides by the order and makes a full repayment, the main consequence will be immediate financial pressure. Broadly speaking, a company that receives a CCJ is unlikely to be in a strong financial position, and so this payment will have a notable impact on its cashflow. If the payment is made within 30 days of receiving the order, there will be no further consequences. However, if the payment is made after 30 days, the CCJ will be registered against the company, which can have additional consequences.

If a CCJ is registered against a company, it will be present on publicly available records for six years. This can have a series of negative effects: the company’s reputation could be tarnished, potential business partners may refuse to work with the company, and creditors may only offer less favourable products if any at all. In other words, standard operations can be made more difficult for a company once it is registered. Furthermore, once a CCJ has been made public knowledge, more of the company’s creditors could view it as a sign to submit their own CCJ. This can cause a cascading effect, where multiple creditors demand repayment in quick succession. Naturally, a series of demands can put unbearable strain on a company’s finances or force it to take major reputational damage from having multiple CCJs registered against it.

What does receiving a CCJ mean for directors?

A CCJ largely leaves directors unaffected. While it can cause directors some reputational damage, as a CCJ is registered under their watch, it likely won’t directly harm a director’s personal finances. The debts in question are company debts, meaning there is no expectation of repayment from a director’s personal finances. However, if a CCJ is issued for a debt secured by a personal guarantee, failing to repay could result in the creditor turning to other methods of debt collection, including demanding repayment from the director’s personal finances.

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How does the CCJ process work?

A CCJ cannot be issued out of the blue. For creditors to submit an effective CCJ, the proper procedure must be followed. Failing to do so will result in the CCJ being illegitimate and easily set aside by a debtor. To avoid this, creditors must follow three steps: issue a letter of claim, a default notice, and then the CCJ itself.

Letter of claim

The first step of the CCJ process is the issuing of a letter of claim. Essentially, a creditor must come to you with the intention of reaching a payment agreement before they issue a CCJ, and a letter of claim allows exactly that.

The letter of claim will detail several methods of repayment. These methods generally aim to make it a bit easier for a company to make repayments, while still ensuring the creditor receives the debt in full. If the company does not agree to any of these methods or outright ignores the letter of claim, the creditor can move on to the next step after 30 days.

Default notice

If the letter of claim is not enough to foster an agreement between a creditor and debtor, then a default notice can be issued. This default notice, sometimes referred to as a warning letter, is more forceful. It informs the recipient of the outstanding debt and demands repayment in full; otherwise, legal action may be taken. This default notice must be sent a full 14 days before further action, and will outline the options available to a debtor.

County Court Judgment

Once the previous two notices have elapsed, a creditor can pursue a CCJ. Creditors can approach the courts with the details of their case, asking for a court order to be issued. Assuming the court agrees with the case and believes a CCJ is the right option, they can issue a judgment demanding repayment. This demand will be for either a lump sum repayment or a repayment via installments.

Once a CCJ has been issued, your company will receive a document detailing the case, with a host of relevant information. This will include the overall debt payable, the creditors behind the CCJ, and dates of repayment, for example. At this stage, you can either adhere to the demands of the CCJ, or attempt to appeal it in court.

How long do I have to pay a CCJ?

Once a CCJ is in effect, you must either pay it in full, enter an agreement with your creditors, or have it set aside in court. If you choose to repay or reach an agreement, you will have 30 days to do so before the CCJ will be registered against your company. This will apply it to your company’s public records, allowing creditors, suppliers, and members of the public to view your CCJ. However, this timeframe is not exactly a deadline. Monthly repayments can be made after this time, as can lump sum payments. Creditors will only resort to further action past this point if you have refused to pay or reach an agreement as ordered by the CCJ. If this happens, your creditors may turn to bailiffs, a winding-up petition, or other forms of debt collection.

How long does a CCJ last?

If your company receives a CCJ and you intend to make a full repayment, it is best to do so within 30 days. In doing so, the CCJ will not be registered against your company, mitigating the negative consequences. However, sometimes, this is not possible, and a full repayment will only be possible after this deadline. In this case, the CCJ will be added to your company’s records, remaining for six full years until it is automatically removed.

How to know if your company has a CCJ

In most cases, directors will be notified multiple times of an upcoming CCJ, and its registration upon court approval. Several notices will be sent to inform directors at various steps throughout the CCJ process, and the particulars of the CCJ itself will be issued to directors. However, there are times when a director will miss one or more of these notifications. As failing to respond to a CCJ can cause serious problems, it is prudent to check if one has been registered against your company from time to time.

When registered against a company, the details of a CCJ will be kept in a public database. These databases can easily be accessed online, with some being free, and others requiring a subscription for information and some additional perks. By using these databases, you can keep track of your company’s records, and check whether a CCJ is registered against your company.

Responding to a CCJ

If a CCJ is issued to your company, time is of the essence to properly respond. Although you may allow the CCJ to elapse, doing so is likely to cause you much more problems in the long run and is not usually a good idea. Your responses boil down to two main categories: paying the debt specified by the CCJ or contesting it in court.

Payment in full

Paying a CCJ is quite straightforward, though it may be easier said than done. If your company has the finances, it can make a lump sum repayment to have the issue dealt with swiftly. However, if a lump sum repayment is not possible, you may be able to reach a payment agreement with your creditors.

A payment agreement can be negotiated through the courts or with your creditors directly. Such an agreement must be reasonable and hinges on a company having a viable business model and revenue stream to keep up with the monthly repayments. If a company reaches an agreement with its creditors yet fails to keep it, it could spark an escalation in debt collection attempts.

Having a CCJ set aside

If you believe your company was wrongfully issued a CCJ, you may be able to contest it in court to have it set aside. While a viable option, it is important to note that contesting a CCJ should not be done frivolously; intentionally making a baseless claim against your CCJ will not be viewed well by the courts and may result in legal penalties.

Appealing the courts to have your CCJ set aside can be done if you believe the CCJ is illegitimate. An appeal could be an option if you have evidence that your creditor has not followed the proper procedure for filing a CCJ, has sent it to the wrong company, or has included false information. You may present this evidence in a court hearing and, if successful, will have your CCJ set aside.

Can a CCJ be removed from my company’s records?

Although a CCJ has serious implications if it is registered against a company, it is not permanent and can be removed. The following are the circumstances in which a CCJ can be removed:

  • Six years have elapsed – A CCJ will be present on a company’s public records for six full years. After this timeframe has elapsed, the CCJ will automatically be removed from the company’s records without any action from directors.
  • Repay the debt within 30 days – If directors repay the debt within 30 of receiving a CCJ, it will not be registered against their company. This prevents any record of the CCJ from being present in public databases.
  • Have the CCJ set aside – Assuming directors are able to successfully contest their CCJ and have it set aside, it will be removed from their company’s records.
  • A third party is responsible for the debt – If a third party is responsible for debt repayment, such as an insurance company, then the CCJ will not be registered against the company.

Avoiding a CCJ

While the negative effects of a CCJ can be mitigated and the order removed from your company’s records, it is often best to avoid one entirely. If full debt repayment is not an option, the use of insolvency procedures could be a viable alternative.

Creditors’ Voluntary Liquidation

Creditors’ Voluntary Liquidation (CVL) is one method of avoiding a CCJ. Once an insolvent company is entered into the procedure, it will be protected from legal action, such as a CCJ or winding up petition. Directors may appoint an insolvency practitioner of their choosing to carry out the procedure. This insolvency practitioner will be responsible for the disposal of assets and distribution of proceeds. At the end of the CVL, the insolvency practitioner will close down the company and remove it from the Companies House register. For more information, read our complete guide to the CVL procedure.

Company administration

Administration may be a good solution if your company has a viable business model, and liquidation is unappealing. By placing your company into administration, you can gain the assistance of an insolvency practitioner and pursue the restructuring of your company to a more efficient entity. This can help get your company back on track, making it easier to repay outstanding debts and stave off a CCJ. However, if it is found that the company cannot be restored as a going concern, liquidation can be pursued instead. Both objectives ensure that your company avoids a CCJ.

Clarke Bell can help

Receiving a CCJ can be an alarming event for any director. It applies more pressure on what is likely an already struggling company and foreshadows future action from creditors if not dealt with swiftly. However, no matter how urgently action is needed, the best solution is not always clear. If you find yourself in such a position, seeking out help is an excellent first step.

Clarke Bell can be that help. We have more than 29 years of experience in helping companies find the best path forward, and we can do the same for you. Our specialist team is certified by the ICAEW and sports a wealth of experience in helping companies out of financial difficulty. Don’t hesitate to contact us today for a free, no-obligation consultation and find out exactly what we can do for you.