How does a CCJ affect a Limited Company?
How does a CCJ affect a Ltd Company?
Sometimes and if necessary, a claimant can issue a County Court judgment when a debtor fails to pay what they owe. A CCJ ratifies the debt and makes it legally binding. It is designed to motivate the Limited company to pay what they owe but that is not always the case.
Failure of a Limited Company to pay a CCJ within a prescribed time limit can damage their credit rating severely. Further action by the creditor by way of enforcing a CCJ could even lead to the closure of the company.
Does a CCJ affect a Limited Company’s credit rating?
If the debtor fails to pay the CCJ within 30 days of the judgment being made by the court then it will be lodged on their business credit score. If the debtor does pay the CCj within 30 days then the CCJ will not appear on their credit file.
Failure the pay the CCJ will see it remain on their credit file for the next six years. This can severely damage their rating and reputation. Potential lenders and suppliers will be cautious of dealing with the Limited Company. The CCJ provides a clear insight into the debtors failure to pay what they owe making them high risk.
It can also put potential customers off too. If they see that the company they are dealing with is not paying their unpaid CCJ’s, it can also be an indicator that they are potentially insolvent.
Does a CCJ force a company to repay a debt?
A CCJ alone does not force a Limited company to repay a debt. CCJ Enforcement is necessary and that comes under various guises. CCJ’s come with no guarantee of repayment and neither does enforcement. Pre-Legal Debt Collection action is often a time and money saver as it can save thousands in costs when compared with litigation and court action.
A CCJ will stay on the Limited Company’s credit file for six years but it does not automatically mean they will pay it. If the question being asked is does a CCJ affect a Limited Company’s credit rating then the answer is most definitely yes. But to get payment from a Limited Company is a different minefield.
Further Enforcement action and debt collection tactics are often necessary. There are a multitude of options available to enforce payment of an unpaid CCJ owed by a Limited Company.
These can vary from freezing orders on their bank accounts through to high court enforcement action. The most appropriate method of enforcing the CCJ will depend on the debtors circumstances. Sure, the stain on their limited company credit rating may hurt but some form of enforcement is often necessary to get payment.
Can a Limited Company Director be made personally liable?
It is a question often asked by people that are owed money by a Limited Company. A Limited Company normally means limited liability for the Directors but there are anomalies. If a signed personal guarantee has been given by a Company Director then yes then can be.
Many finance lenders insist on personal guarantees from Directors before approving loans to them. It protects the lender and gives them the option to recover the debt from the individual should the company fail to pay or become insolvent. Personal guarantees can sometimes be secured on a Directors high value assets and this circumvents the Company’s limited liability status.
This will mean the Director would have to pay the Company’s debts out of their own pocket.
Thinking of issuing a CCJ against a Limited Company?
Issuing a CCJ is not always the best option. It is important to note that issuing a CCJ against a Limited company can be a costly exercise. The well trodden road of expensive litigation and suchlike is not always a cost effective route, far from it.
A Professional Debt Collection strategy will likely get a debt paid far quicker. Any monies owed by a Limited Company can often be reclaimed quickly in a professional and cost friendly manner. Debt Collection solicitors or debt collection agency is a question some ask themselves. Some worry than a debt collection agency may not be as professional. As an award winning, FCA regulated debt collection agency we can confirm we are.
Less than 1% of the cases we deal with at Federal Management result in court action. We see it as a last port of call for our clients. This minimises the cost to them and our strategies enable us to recover unpaid business debts far quicker than the traditional methods. Our recovery rate is also far higher than the average debt collection agency. If your Business is owed money then speak to our specialists today for a free expert analysis of your problem.