What are Your Options, as a Company Director, when Faced with a County Court Judgement?

CCJs (County Court Judgements) are often the result of creditors failing to recover a debt from your company despite several past attempts.

Here we will explain the process you will be faced with and the various routes that are available.

So, if you are unsure about the effects a CCJ will have on both your company and yourself as the director, and what you need to do to return your business to a strong position, read on.

What is the process of being issued with a CCJ against your company?

The following is the usual process when faced with a CCJ:

1. A County Court Summons will be issued
2. You will be given 14 days to respond. You can request a further 14 days to give you some breathing space to decide which action to take.
3. If the court deems the debt valid and you have issued no response, or repayment negotiations have been unsuccessful, a CCJ will be issued against your company
4. At this point your business is allowed 30 days to pay the full amount or the CCJ will become official – this is the point at which your credit score will be damaged
5. If the debt remains unpaid after issue, this is seen as proof that your company is insolvent
6. Unfortunately, the process doesn’t end here. Further action may be taken if the debt is still unpaid – creditors can issue a winding up petition, which could result in compulsory liquidation and closure of your company

When a CCJ is threatened against your company the paperwork should be completed as soon as possible.

Professional advice is advisable if you dispute the debt or if negotiations cannot be made in the first 14 days after the County Court Summons is issued.

There are a range of formal insolvency solutions that could save your company in the event of a CCJ being issued.

What you need to do and your potential options

If your company is issued with a CCJ there are a few things you’ll need to do and there are some options available to get the judgement removed:

• Check that the amount is correct – dispute the debt if you have a valid reason for doing so
• Negotiate to pay by instalments, although when it has reached this stage successful negotiations are uncommon. Make sure to contact the creditor directly and explain your situation, offering whatever you can afford to. If they refuse at this stage, you can apply to the court for a variation of the Judgement by submitting a N245 form.
• Seek professional help to negotiate on your behalf
• Arrange funding or financing before the CCJ is issued
• Enter administration with the view to restructuring

A CVA (Company Voluntary Arrangement) could be organised before the CCJ is issued, which is beneficial in cases where your company owes more than one debt, as all repayments can be consolidated into one monthly payment.

Even if a CVA is arranged after a CCJ has been issued, the judgement will be overturned and no further summons can be applied for by your creditors.

If your business is in a position that means there is no way of repaying the debt, a liquidation is likely to be your best option – a pre-pack solution can be used to set up a new, debt free company.

Does this situation affect you personally as a company director?

If you are running a Limited company, a CCJ will affect your business’ credit rating, but your personal credit rating should remain intact unless:

• you have made a personal guarantee against the amount
• your personal funds are held in the business account

In these cases, your income will be deemed unreliable, creating subsequent personal issues.

Also, County Court Judgements stay on a publicly available record called Companies House, so the situation is liable to damage your company’s reputation and possibly your trustworthiness as a director of future ventures.

However scary this all sounds, there are many ways to avoid these knock-on effects. If you feel that you might need some help, give us a call now on 01472 254914.

Can you still get business finance with a CCJ?

Obviously, a damaged credit rating as a result of a CCJ having been issued can deter debtors from lending you money.

Many SME (Small to Medium Enterprise) lenders, however, look at the big picture, taking the whole business into account.

This will give you a chance to explain why the CCJ was issued.

For example, if unforeseen cash flow hurdles were presented (for example, one of your trusted customers missed their payment at an inconvenient time), this will be considered, and especially if you are able to demonstrate how you have learnt from the setback, you can help your case considerably.

Secured loans (guaranteed by business assets) will be your best bet in a situation where you have had a CCJ issued against your company.

This lowers the lender’s risk and makes your case much more attractive, but you may not need to write off the possibility of gaining an unsecured business loan.

Your luck will depend on how long ago the CCJ was issued, the length of the loan you are applying for and the strength of your business during the relevant period.

6 tips to increase your chances of gaining finance with a CCJ

• Pay the CCJ immediately (it won’t stay on your record for as long if you pay up within a month)
• Identify the root cause and learn from your mistakes
• Wait for a period of at least a year before applying for finance
• Don’t let it happen again
• Use business assets to secure your finance
• Seek professional help and use an intermediary

If you feel overwhelmed as a result of a CCJ, don’t hesitate to give us a call. We listen to your personal circumstances and will be able to present you with the best options going forward.