A County Court Judgement or CCJ is a court order, issued by a county court, to enforce the repayment of a debt. 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 one a creditor will only take if they have exhausted all other attempts to enforce the payment of a debt. 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:
-
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, which would declare it unenforceable. To do that, you must make the application promptly and be able to show that you have a good chance of successfully defending the claim. Alternatively, there must be a good reason why you should be allowed to defend the claim, such as if the claim form was sent to the wrong address. If the CCJ is set aside then it will be removed from the register and it will not have any impact on your limited company.
-
Appeal the CCJ
Another course of action you could choose to take is to appeal the CCJ. This can only be done if the decision to issue the CCJ was wrong i.e. you dispute the debt or the amount owed and can prove you’re not liable to pay, or there was some procedural error or other irregularity in the proceedings. An application to appeal a CCJ should be made within 21 days of the original decision. If you win the appeal then the CCJ will be removed from the register and it will have no impact on your limited company.
-
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.
-
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, you will receive a ‘Certificate of Satisfaction’ that the CCJ has been paid and the CCJ will be recorded on your company credit file as ‘settled’. The CCJ will be visible on your file for the next six years. That will show future lenders that the debt has been paid but it could make them rethink lending decisions.
-
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 giving at least 14 clear days, and their fees are added to the debt. 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 CCJ process starts with an online application. The form you’re required to fill in will ask for information about the creditor, the debtor and the circumstances of the claim. Once the application has been submitted, the debtor will be sent a letter from the court explaining how much they owe and asking them to complete a CCJ Claim Form, which will give the debtor their chance to give their side of the story.
The county court will then decide whether there is a proven debt to pay before issuing the CCJ. The debtor will have 14 days to either accept the claim or dispute the debt or the amount owed. It is also possible to ask for a 14-day extension. If the debtor does not dispute the claim, judgment can be entered. Paying in full within one calendar month of the judgement date keeps the entry off the register altogether.
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.