How Does A CCJ Affect A Business?

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A County Court Judgement (CCJ) is a court order that can be issued against a company in order to recover unpaid debt. If creditors have made multiple attempts to recover the debt that they’re owed with no success, then their last resort may be to take legal action like this. As you can imagine, this can have severe consequences for the company, but exactly how does a CCJ affect a business?

It’s essential to respond to a CCJ within the time period specified. Failure to do so could result in the following consequences:

Influencing Credit Rating

One of the biggest concerns that directors have when asking how does a CCJ affect a business is whether or not it will impact their credit rating. If you ‘satisfy’ the CCJ within the specified time then it shouldn’t affect your company’s credit rating. If you fail to pay the amount within the time required then the CCJ may appear on your company’s credit file for the next six years, making it difficult to apply for business loans and other financial arrangements.

Compulsory Liquidation

If you ignore the CCJ or refuse to pay, then it could lead to further action being taken against the company, such as bailiff action  or the seizure of business assets. In the most severe cases, creditors may apply for a winding up petition, which, if granted, could result in the company being forcibly liquidated

Are Directors Personally Affected?

Understandably, one of the major fears that directors have regarding how does a CCJ affect a business, is whether or not it will impact their personal finances. The good news is that limited liability protects directors of a limited company from being personally liable for the company’s debt. A director will only be personally liable if they have personal guarantees secured against a loan. 

How To Respond To A CCJ 

It’s essential that you respond to the CCJ within the time specified, either by paying the debts, or applying to have the judgement cancelled or ‘set aside’ if you disagree with the amount that is owed. 

You should also seek the advice of a licensed insolvency practitioner who will be able to advise you on the best course of action for repaying creditors. This may include one of the following options:

Company Voluntary Arrangement (CVA):  This is a binding contract between a company and its creditors to pay back some or all of its debts over a specified period of time. This can be a really effective tool for relieving creditor pressure for some companies.

Creditors Voluntary Liquidation(CVL): If the company is unable to pay the debt that is owed, then the best option may be to voluntarily liquidate the business. This will prevent any further legal action from being taken against the company, whilst enabling redundancy and other statutory entitlements to be claimed.

Pre-Pack Administration: This refers to the pre-packaged sale of the business and its assets. This means that the business is effectively sold before the administration is announced. 

If you have any further questions regarding “how does a CCJ affect a business”, or need help regarding a CCJ that you’ve been issued, My Liquidation’s experienced team of insolvency practitioners can help. Don’t hesitate to get in touch with us to discuss your options. 

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