The best way to prevent a company CCJ is to ensure all debts are paid on time. However if your business is struggling it is not always possible. Where this is the case agreeing payment instalments with creditors may be an option. Alternatively implementing a company rescue solution could be the answer.
- Agree time to pay to avoid a CCJ
- When are negotiations with creditors unlikely to prevent a CCJ?
- Alternatives to time to pay agreements
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Prevent a Company CCJ with a Time to Pay agreement
If your company is struggling to pay its debts you should first try to agree time to pay. Most creditors will accept sensible payment instalments. At the end of the day they are simply interested in getting back the money they are owed. They do not want to have to go through the hassle of Court action.
Agreeing a payment plan and then sticking to it will normally allow the company to avoid CCJs. This is the case even if the debt has been outstanding for a long time. Even HMRC will agree time to pay. However tax debt will normally have to be repaid within 12 months.
Negotiating time to pay may not work if your company has multiple debts. The time required to do this will drag the focus of the management team away from running the business. In this situation a company rescue solution might be a better option.
Use a Company Voluntary Arrangement to prevent a CCJ
If your company is struggling to pay multiple debts this may indicate a wider financial problem. In these circumstances you should consider implementing a company debt solution. This will prevent you having to spend time dealing with multiple creditors and County Court Judgment applications.
One of the solutions that can be considered is a Company Voluntary Arrangement (CVA). This is a formal agreement to reduce debt payments with all the company’s creditors.
Once a CVA is in place the company is legally protected from any further legal action. In addition any CCJs already in force are overturned. The creditors included in the arrangement are no longer allowed to apply for new CCJs or try to close the company with a Winding Up Petition.
Use Pre Pack Liquidation to prevent a CCJ
Where a company is not in a position to repay even part of its debts in reasonable time Pre Pack Liquidation might be an option. This solution involves starting a new company which then trades in place of the old. The old company is then liquidated and unpaid debts are written off.
The old company’s creditors have no right to pursue the new business for the payment of outstanding debts. CCJ applications in relation to the old debts are not allowed against the new company.
Pre Pack Liquidation can leave directors personally responsible for repaying company debts if they have given guarantees. In addition and investigation of the director’s conduct will be carried out. This could have serious implications such as director disqualification.