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How will a County Court Judgement affect my business?

If your company is issued with a county court judgement, this will reduce its ability access new credit and may lead to further action such as a petition for winding up.

When one your creditors is owed money that is overdue and not being paid, one of the first actions they are likely to take against your business is an application for a County Court Judgement or CCJ.

A CCJ is a court order requiring your business to pay an outstanding debt. The court will require payment to be made either in full or in accordance to an agreed payment plan.

A CCJ has serious implications for the company

It is sensible to avoid a CCJ being taken out against you because once in place, it will have serious implications for your credit rating. If the judgement is agreed by the court, it will be recorded on your company’s credit file and advertised in the Stubbs Gazette.

If you wish to borrow in the future, the potential lender will undertake a credit check on the business. The CCJ will show up on this check and it is likely your credit application will be refused or only accepted with substantial personal guarantees.

If a country court judgement remains unpaid, this could lead to more serious action being taken against the business.

It is becoming more and more usual for aggrieved creditors to petition for the winding up of a company. Generally such a petition will not be granted by a court unless there is evidence that previous efforts have been made to collect the outstanding debt. An unpaid CCJ will help provide this evidence.

CCJ application should not be ignored

If your company receives notification that one of its creditors has applied for a CCJ against it, you have the opportunity to either pay the outstanding debt or challenge it before the judgement is made.

If the debt is owed but the business cannot afford to pay, it is very important that you complete the admission documentation and make a sensible offer of staged payments. If you do so, the court will take note of the company’s situation when deciding what repayment plan is reasonable.

Once the judgement is made, the business will be able to pay the debt in sensible instalments thus protecting itself from further action.

If you ignore the application, the court will generally make a judgement without the benefit of your input and often require that the outstanding debt is paid in full as a one off payment.

When this is not adhered to, your non payment of the CCJ can be used as justification for presenting a winding up petition.

If your business receives a county court judgement, this does not automatically mean that a winding up order will follow. However, the outcome of receiving a judgement will be that the company’s credit rating and thus ability to borrow in the future will be negatively affected.

However, it is very important that you do not ignore an application for a count court judgement or payments towards a judgement once it is issued. Non payment will often give rise to further action against the company including actions to wind it up.

If your business is in financial difficulty why not talk to us about solutions to help your company buck the trend, more info at http://coopermatthews.com/business-recovery-services-advice.html

Derek Cooper is Managing Director of Cooper Matthews Limited and a member of the Turnaround Management Association UK.