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You might receive credit from other companies, including your suppliers, as a business owner. In this case, you agree on payment terms for settling your debt, such as a 30-day invoice period. It is important to honour these payment terms, or the creditor might take court action against you. This action can result in receiving a County Court Judgment (CCJ). This article will explain CCJs and their legal implications for your business.
What is a County Court Judgment?
A CCJ is a court order that a county court may issue to an individual or a business. This means that due to a legal claim by someone for money, they believe you owe them, and you have a judgment registered against you for the debt. Therefore, the court agrees that you owe the person or business the debt they claim you owe them. Under your name, these judgments will appear in the Registry of Judgments, Orders and Fines. This is a public register that anyone can access.
It is also possible to receive a CCJ “in default”. This means you failed to respond to a court claim within the correct time frame, so the creditor applied for this from the court. Therefore, the court does not need to consider the claim’s merits.
What are the Legal Implications of Receiving a County Court Judgment for My Business?
If your business receives a CCJ, it can have significant legal implications. While a CCJ does not mean you owe the money if your business is a limited company, it does harm your business. We take a look at some of these implications below.
Poor Credit Rating
Credit reference agencies will receive your CCJ when it enters the Registry of Judgments, Orders and Fines. They place the CCJ on your credit file, meaning your credit rating goes down. A low credit rate implies that credit on business purchases will be challenging. It will also affect whether your business can take out a loan. As a CCJ lasts six years, the effect on your credit rating lasts longer. A poor credit rating may affect suppliers wanting to do business with you.
Further Enforcement Action
If your business receives a CCJ, it is crucial that you pay it as required, or there could be further legal implications. The court will typically ask you to clear the debt in full within one calendar month of the date of judgment. However, they may allow you to clear the debt in instalments. If you remove the debt after one month but before the six-year timeframe ends, the CCJ will remain on the Registry. It will have ‘satisfied’ written next to it, which shows that it has cleared the debt.
Failing to pay the debt after a month or failing to keep up with any instalments the court allows to clear the debt means that the creditor can take enforcement action against your business. Although a CCJ formally demands debt payment, it cannot make you pay it. Further enforcement action can include:
- bailiffs visiting your business;
- compulsory liquidation of your business; or
- a winding up petition against your company.
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Removing or Disputing a County Court Judgment
Since a CCJ has significant legal implications for your business, knowing how to remove or dispute one is important.
You should note that completing step three may be a lengthy and tricky process. However, once you set aside a CCJ, it will be removed from your credit file. It is advisable to seek legal advice, as the court case will remain open.
If you agree you owe the debt the CCJ relates to and do not dispute any aspect, you should pay the debt in full within one month of the court document date. This means that the CCJ will be cancelled. This removes the document from your credit file with no implications for your business.
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Key Takeaways
If you do not pay off your business debts in the agreed timeframe with your creditor, you may face legal action such as a county court claim. If you ignore this, it can result in a CCJ. A CCJ will be listed against your business on the Registry of Judgments, Orders and Fines.
There are legal implications for receiving a CCJ for your business, such as a poor credit rating resulting in the refusal of credit for your business. Another implication is further enforcement sanctions, such as bailiffs forcing your business to pay the debt. As there are legal implications for receiving a CCJ, you need to know how to remove the CCJ or set it aside. You can do the former by paying the debt in full within a month of the court documents date. If you dispute the debt, there are procedures you can follow to set it aside.
If you need help understanding CCJs in the UK, our disputes and litigation solicitors can assist as part of our LegalVision membership. For a low monthly fee, you will have unlimited access to lawyers to answer your questions and draft and review your documents. So call us today on 0808 196 8584 or visit our membership page.
Frequently Asked Questions
A CCJ is an order by a County Court to confirm that your business owes a debt that another person or business claims you owe them.
CCJs can have serious implications for your business, such as reducing your credit rating, which can result in a poor credit rating.
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