A County Court Judgment, or CCJ, is an order of the County Court in England and Wales that a sum of money be paid. If it is not paid, the creditor must take a separate step to enforce it. Scotland and Northern Ireland have their own systems. A judgment paid in full within one month of the date of judgment comes off the public register entirely. Left unpaid, it stays there for six years, and the consequences can be damaging both for the business and for your position as a director.
Applying for a CCJ is a serious step, and a creditor usually takes it only after repeated requests for payment have failed. A CCJ is what lets the creditor start formal enforcement, so no other enforcement step has to come first. However, if they have repeatedly asked for payment to be made and are not satisfied that it’s a debt you intend to pay, they will be left with little choice but to apply to the court for a CCJ to be issued.
How Does a CCJ Affect a Limited Company?
That depends entirely on the action you choose to take on receiving the CCJ. There are five potential routes you could take:
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Apply to have the CCJ set aside
If the CCJ is what is known as a ‘default judgement’, i.e. one where you failed to acknowledge the claim or put in a defence, you could apply to have the CCJ set aside. If the court sets it aside, the judgment is cancelled and the claim goes on, so the company will then need to defend it. Apply as soon as possible, because the court takes delay into account. The court must set the judgment aside if it was wrongly entered, for example before your time to respond ran out, or after the whole claim had already been paid. Otherwise it may set the judgment aside if you have a real prospect of defending the claim, or there is some other good reason why you should be allowed to defend it, such as if the claim form went to an address that was valid for service, like the registered office, but never reached you. If the claim was never validly served at all, the judgment was wrongly entered and the court must set it aside. If the CCJ is set aside, the entry is removed from the register, but the court may attach conditions, such as paying money into court, and a fresh judgment can follow if the defence fails.
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Appeal the CCJ
Another course of action you could choose to take is to appeal the CCJ. An appeal is normally made against a judgment given after a hearing. You normally need permission to appeal. The appeal court reviews the decision and will allow the appeal only if it was wrong, or unjust because of a serious procedural or other irregularity. A default judgment is normally challenged by applying to set it aside instead. The appeal must be filed within the period the court directs. If the court gives no direction, the period is 21 days from the date of the decision. Ask the judge at the hearing whether a different period applies. If you win the appeal then the CCJ will be removed from the register and it will have no impact on your limited company.
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Pay the CCJ in full within one month
If you pay the CCJ in full within one calendar month of the judgement being made, the entry is removed from the Register of Judgments, Orders and Fines altogether and there will be no impact on your limited company. One month is the rule, not 30 days, and the difference matters in most months. You will be required to inform the court and send it proof to show the payment has been made.
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Pay the CCJ after more than one month
You might choose to pay the CCJ after more than one month, either in one lump sum or through a series of instalments, possibly because you don’t have the necessary cash-flow to make the payment any sooner. In that case, tell the court the debt is paid and apply for a certificate of satisfaction, in writing or on form N443, with the fee. The court does not send one automatically. The register entry is then marked as satisfied, but it stays on the register for six years from the judgment date. That will show future lenders that the debt has been paid but it could make them rethink lending decisions.
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Refuse to pay the CCJ
If you refuse to pay the CCJ, you are potentially creating a serious situation that could escalate quickly. The creditor has a range of options. Taking control of goods is the one people picture, and it does not begin with someone at the door: an enforcement agent must first serve a notice of enforcement, normally giving at least 14 clear days, and their fees are added to the debt. The court can allow shorter notice only if goods are likely to be moved or disposed of to avoid enforcement. A creditor can also apply for a third party debt order against the company bank account, or a charging order over company property. Ultimately, an unpaid CCJ could lead to the creditor issuing a winding-up petition, which is the most serious threat your company will face. It does not give you seven days to pay, whatever you may have read. There is no such deadline. What exists is a restriction on the creditor: the petition cannot be advertised in the Gazette until at least seven business days after it is served on the company. Once it is advertised the bank will normally freeze the account, so the window to act is short and it starts on service.
Even in the unlikely event that the creditor does not pursue the debt further, you will have an unpaid CCJ on your credit record for six years, which will seriously hinder your chances of accessing competitive business funding, updating vital machinery or other key assets and getting assistance with cash-flow.
What Happens to a CCJ After Six Years?
Six years is a record period, not an expiry date. After six years the entry comes off the Register of Judgments, Orders and Fines and credit reference agencies stop reporting it. The debt is still owed and the judgment can still be enforced.
What changes at six years is that some enforcement routes need the court’s permission first. Under rule 83.2(3)(a) of the Civil Procedure Rules, where six years or more have elapsed since the date of the judgment, the writs and warrants that rule covers — writs and warrants of control, writs of execution, warrants of delivery and warrants of possession — may only be issued with permission. It is not a blanket permission requirement across every method of enforcement, and delay will also affect how the court exercises its discretion. That is an extra step for the creditor to take, not a wall they cannot get past.
Two related rules are often quoted as though they cancelled the judgment. Section 24(1) of the Limitation Act 1980 stops a creditor bringing a fresh court action on the judgment after six years, but the House of Lords held in Lowsley v Forbes that enforcing the judgment you already have is not a fresh action, so enforcement is not caught. Section 24(2) does bite on money: interest arrears more than six years old cannot be recovered.
So waiting it out is not a strategy. For a company the realistic escalation is not enforcement against goods at all. It is a winding-up petition, and nothing about the six-year point restricts that.
If you have only just received a CCJ and are considering not paying it, think about the two costs separately. One is the credit rating, which is bad for six years. The other is that you remain exposed to enforcement, and to a winding-up petition, for as long as the debt is unpaid. The second is the one that closes companies.
Can you get Finance with a CCJ?
One of the first things a prospective lender will look at when you make an application for business finance is the company’s credit record. An unpaid CCJ will remain on your company’s credit record for six years and impact its credit rating significantly, which will certainly make it more difficult to secure business finance. This may also extend to your suppliers. Modern credit control applications allow suppliers to view recent CCJs and that could make them reluctant to extend credit to you.
Although a CCJ will reflect badly on your business, it doesn’t necessarily mean you won’t be able to find funding. Many lenders will look at the whole business case, with an active CCJ being just one piece of the puzzle. Unsecured business finance with a CCJ is likely to be difficult to obtain, but secured credit could still be an option. If the business has physical assets that loans can be secured against or business-to-business invoices that can be used as security, there’s a good chance you’ll be able to find affordable finance.
Can I be a Company Director with a Personal CCJ?
Yes. There is nothing to stop you from becoming a company director if you have a personal CCJ registered against you. As a limited company is a separate legal entity from you personally, there’s no reason why your own less than perfect credit record will directly affect your business. If you are required to give personal guarantees for credit or prospective lenders run a credit check on you personally then it may make it more difficult to secure finance. However, as long as you are not prevented from becoming a company director for any other reason then a personal CCJ should not be an issue.
How to Issue a CCJ Against a Business
If you are the creditor and have made repeated requests for payment but emails, letters and phone calls have not worked, the next step might be to consider a County Court Judgement. The process starts with a money claim, made online or on form N1. The form you’re required to fill in will ask for information about the creditor, the debtor and the circumstances of the claim. The court then serves the claim form on the debtor with a response pack. The debtor can admit the claim, file a defence, or file an acknowledgment of service.
The debtor will have 14 days to either accept the claim or dispute the debt or the amount owed. Filing an acknowledgment of service in that time gives 28 days from service of the particulars of claim to file a defence. The creditor can agree a further extension of up to 28 days, and the debtor must tell the court in writing. If the debtor does not respond in time, the creditor can get judgment by request without the court looking at whether the debt is owed. The court decides whether the debt is owed only if the claim is defended. If the debt is paid in full within one calendar month of the judgment date and the court is sent proof, the register entry is cancelled.
Need advice?
If your business is faced with a CCJ, the whole situation can be daunting. However, it’s essential you act quickly. At AABRS® , our insolvency practitioners have a wealth of experience helping company directors find appropriate solutions to keep your business on track. Get in touch with our team today for a confidential discussion of your circumstances.