Company Director Options When Facing a County Court Judgment
Applying for a County Court Judgment (CCJ) against a limited company is often the result of several attempts by creditors to recover a debt. If your company has received a CCJ, you may be wondering what effect it will have on the company and also on you as an individual.
Although it will affect the company’s credit rating, your own credit file should be unaffected unless you provided a personal guarantee. If the company bank account and your personal accounts are held at the same bank, you may also find that your borrowing capacity with the bank is affected.
What effect could a CCJ have on your company?
Unfortunately, if your creditor has made several attempts to recoup what is owed, and you have either been unable or unwilling to meet their demands, they may take further action.
The following is a general outline of what could happen if a creditor involves the courts:
- A County Court Summons is issued by your creditor in an attempt to recover their debt
- You have 14 days in which to respond, and can request a further 14-day extension period
- If further attempts at negotiation are unsuccessful, or no response is made and the court agrees that the debt is valid, a County Court Judgment will be issued against your company
- At this point, you have 30 days in which to pay the debt in full, otherwise the court will officially register the CCJ and inform credit reference agencies
- Not paying within the 30-day period validates the creditor’s claim for their money and provides proof that your company is in an insolvent position
- This may result in them taking further action in the form of a winding up petition, which could quickly lead to compulsory liquidation and closure.
Clearly, there is a need to act quickly if a CCJ is threatened. You need to complete and return the court paperwork as soon as possible. If informal negotiations with your creditor are unlikely to be successful within the 14-day period, or you are going to dispute the debt, you should seek professional advice. A range of formal insolvency solutions exist that could save your company.
Begbies Traynor is licensed to act as Insolvency Practitioner and can arrange a free initial consultation at your local office.
Your options as a company director when facing a CCJ
The above series of events can be halted, but you need to be aware of all your options before taking action unless you can repay the debt in full. This is where an IP’s guidance is vital.
Here is a summary of your options:
- During the 14-day period or (28 days if you have applied for an extension)
- Check that the debt figure mentioned is correct – is it the right debt?
- Dispute the debt if you have valid cause for doing so
- Negotiate by phone or letter to pay by instalments, although if this stage has been reached, the likelihood of success is increasingly unlikely
- Hire a licensed Insolvency Practitioner to negotiate on your behalf
- Arrange funding or financing before the CCJ is issued, perhaps asset-based lending
- Enter Company Administration with a view to long-term restructuring.
The involvement of an Insolvency Practitioner could be key to successful negotiations. They may be able to negotiate a Company Voluntary Arrangement with the creditor prior to a CCJ being issued. This would benefit the company if there is more than one debt in existence, as all debt repayments would be consolidated into a single monthly instalment.
Does it personally affect you as a director?
If your personal accounts are with the same bank as the company, the bank may be reluctant to offer or extend overdraft or credit card facilities to you as an individual. Your income may be viewed as unreliable, which would create subsequent issues for you personally.
Enforcement of a County Court Judgment against a company
Having a CCJ recorded on your company’s credit file will make it difficult to trade with the freedom previously enjoyed. In fact, a County Court Judgment can affect trade so seriously that the company’s financial situation deteriorates rapidly.
It is the reluctance of suppliers to offer credit terms, and of lenders to grant borrowing, that severely restricts operations, and sometimes results in an irrecoverable position for the company.
Begbies Traynor is the UK’s market leader in corporate recovery. Contact a member of our expert team to discuss your situation.