If a company owes money a County Court Judgment (CCJ) may be issued against it. This does not force the debt to be paid. However there are some serious implications nevertheless.
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What is a County Court Judgment?
If a creditor cannot recover a debt owed they are likely to apply for a CCJ. This is a Judgment issued by the Court. It is confirmation that the Court believes the debt is owed and that it should be paid.
The Judgment may require the debt to be paid immediately and in full. Alternatively the Court may have agreed affordable monthly payments. Such an arrangement is possible if the company has responded correctly to the application notice.
After a CCJ is issued the company is not forced to pay the outstanding debt. This would require further Court action. However life is made much more difficult for the business.
Affects of a CCJ on a Company
The most significant effect of a CCJ is the company credit rating will be negatively effected. The Judgement is registered at the Court and listed in the Stubbs Gazette. As a result it is recorded on the company’s credit file.
Once issued a CCJ remains on the company credit file for 6 years. It stays on the file even if the debt is subsequently paid in full.
The Judgment will make it significantly more difficult for a company to get new credit. If an application is made to a supplier or lender it will show up on the credit check. The application is then likely to be declined. The company may then only be able to get more expensive forms of credit.
The company may also find it more difficult to trade with new clients. Potential clients may be put off when they discover the existence of the CCJ. It potentially calls into question the company’s financial stability.
How to deal with a Company CCJ
Even though a CCJ has been issued the creditor cannot force the payment of its debt. However the Judgement should not be ignored. If the company makes no effort to pay the creditor may then apply for a Winding Up Petition. This would have very serious implications.
If a Judgment has been received the first thing to do is try to agree staged payments. Even at this stage if the company can offer a reasonable payment plan most creditors will be inclined to accept this. However if it is impossible to negotiate sensibly then the directors could consider a Company Voluntary Arrangement (CVA).
A CVA will legally bind all the company’s unsecured creditors including any CCJs into an affordable payment plan. However it will not resolve the issue of the company’s poor credit rating.
The alternative option is to consider a Pre pack Liquidation. This allows a new company to take the place of the old. The new company can trade without any debt repayments. It also has a clean credit rating. However there may be additional up front costs. In addition a report on the conduct of the Directors will be issued by the Liquidator.