A County Court Judgement (CCJ) is a court order registered against a company, usually resulting from a business repeatedly failing to pay its creditors.
A CCJ essentially provides evidence of insolvency and can be used by creditors to shut down a business.
In 2018 alone, more than 93,000 CCJs were issued against companies, representing a 27% increase over the previous year.
What happens when my company is issued with a County Court Judgement?
When faced with a CCJ, the following steps are taken:
- Your company is issued with a County Court Summons.
- You are given two weeks to respond, though it is possible to request a further two weeks to provide you with more time to decide on a course of action.
- If the County Court deems that the debt is valid and you fail to respond or are unsuccessful with repayment negotiations, your business will be issued a CCJ.
- Your company is then given 30 days to pay the amount in full, or the CCJ will become official.
- If your debt is still unpaid after 30 days, your company will be deemed insolvent.
- If the debt remains unpaid after that, you could face further action as creditors can issue a winding-up petition, which could result in compulsory liquidation and the closure of your business.
Will a County Court Judgement affect my credit rating?
Unless you repay the debt fully within 30 days of a CCJ being issued, it will impact your company’s credit rating for six years.
This will make it difficult for the company to secure financial arrangements and loans. It will also affect your personal credit rating – particularly if you use the same bank for your personal account.
Even if you repay the debt within 30 days, it will still be recorded on your file under the term, ‘settled.’
What are my options if my company is facing a County Court Judgement?
To stop your business from being issued with a CCJ, it’s crucial to follow all the requests on the order. As previously mentioned, you will have 14 days to respond, fill in and return the necessary paperwork.
This claim will give your company the chance to repay its debt, request more time to pay, or appeal the judgement, providing you have the information to support your appeal.
If you fail to respond to the order, the CCJ will then be issued as a default judgement by the court. This could lead to bailiff action, which will also be marked on the company’s credit report.
Unfortunately, once an order has been issued, it’s impossible to reverse it. However, there is still time to prevent a winding-up petition if you manage to pay all the debts within the agreed period.
To prevent your company from being issued with a winding-up petition, one thing you can do is to seek advice.
If your credit rating has been affected by a CCJ, there is an option to be hived down or hived across to a newly-formed subsidiary which, in effect, will wipe your slate clean.
However, this is an extremely complicated process, and you must follow Section 238 of the Insolvency Act 1986 and not breach ‘transaction at under value.’
Another option is to organise a Company Voluntary Arrangement (CVA) before the CCJ is issued. This is hugely beneficial if your business owes more than one debt, as all your repayments can be consolidated into one monthly amount.
Even if a CVA is arranged after a CCJ has been issued, the judgement will be overturned, and your creditors won’t be allowed to apply for further summons.
If your company is facing a CCJ, don’t hesitate to contact the Future Strategy team today.
