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How Do County Court Judgements Affect Limited Companies?

How Do County Court Judgements Affect Limited Companies?

If you own a limited company, there’s much to be aware of – including a County Court Judgement (CCJ). A creditor, which is a person or an organisation that’s owed money, can make a CCJ against a company, so it’s important to understand what to do if it happens to you.

If you own a limited company in the UK, read on to learn more about CCJs and how to prevent one from being filed against you.

 

What is a County Court Judgement (CCJ)?

A CCJ is a legal judgement which is issued by a County Court, often due to failure of debt repayments. This means that if your limited company fails to repay any debt that’s owed, you’ll likely have a CCJ filed against you. If the money owed by your company is left unpaid for more than 30 days, it could have detrimental effects on your business.

 

What is a Limited Company?

A limited company is privately owned, with a business structure that’s separate from any owners or managers. All limited companies have their own legal identity (not including company directors or shareholders).

When a limited company in the UK makes money, the funds belong to the company, not the people involved. In short, this means that both directors and shareholders are unable to take money out of the company when they want to.

Limited companies pay Corporation Tax – the current rate for Corporation Tax is 25%, but this can change depending on your profit.

For example, if your limited company makes over £250,000 in profit, you’ll need to pay the main rate of Corporation Tax. However, if your company has made less (£50,000 or less in profit), then you’ll pay a small profit rate of 19%.

 

Why Are CCJs Filed?

A CCJ is filed when a creditor takes legal action against a company that owes money and fails to make a payment or respond. It’s important for companies to stay on top of their debts. By not doing so, your business could land in a lot of trouble, especially with the County Court.

 

Has Your Company Received a CCJ?

If your company has received a CCJ, you should act quickly. Receiving a CCJ is serious, and indicates that you’ve failed to make payments regarding your debt on time. The process entails a few key stages before you’re issued with a CCJ:

  1. A creditor will apply to the County Court for a CCJ against your company
  2. You (the debtor) will receive a ‘letter before claim’ from the creditor, stating the reason for the claim and when it’s due
  3. If you fail to pay any debts that are owed, the creditor will take further action
  4. You’ll then receive a claim form from the court by post requesting a response
  5. You’ll have a response period of around 14 days to respond
  6. If you still fail to respond, a CCJ will be issued

 

If a CCJ does end up being filed against you, you’ll receive confirmation in the post. The letter will contain all the information needed to resolve the unpaid amount of debt:

  • Instructions on how to respond
  • Consequences in court if you fail to respond
  • Payment terms
  • The deadline, which is typically a month from receiving the CCJ

 

If you rightly decide to pay your CCJ on time, you can then apply to have it removed from the register. However, if you continue to ignore the payment, negative consequences will occur. Read on to find out more.

 

How Can a CCJ Affect Your Limited Company?

Several negative effects come with having a CCJ registered against your limited company:

  • A CCJ can stay on your company’s credit file for six years, affecting your credit record
  • Your reputation will be damaged
  • Your company’s ability to borrow from suppliers could be affected

 

Ultimately, the best option for any limited company is to pay off owed debts right away to protect the company’s future.

 

Can You Refuse a CCJ?

Once a CCJ has been issued, refusing to pay isn’t that simple – and definitely not advised. Refusing to pay your debts for no reason will likely lead to bailiff action and your business’s assets being seized.

However, you can apply to have the issued CCJ set aside or cancelled if:

  • You’ve already paid your debt
  • You believe that you don’t owe any money
  • You didn’t receive anything about your CCJ from the court (this could be due to relocating, or they got the wrong address for you)

 

If the unpaid payment is left unresolved for too long, the judgement could result in the compulsory liquidation of the company. Outstanding debts should be taken care of and paid in good time if you want to avoid legal action being taken against you.

 

Expert Assistance for Limited Companies

Avoiding issues, such as receiving a CCJ, can be prevented by having an accountant handle your affairs. Limited companies typically have greater reporting requirements, but our trusted accountants can take care of them for you.

At LJS Accounting Services, our accountants act as friends, leaders, and financial advisors. It’s easy to create distance from that entrepreneurial spark when you’re dealing with debts, which is why it’s beneficial to have an accountant working on your behalf.

We’ve been trusted for over a decade. With us handling your accounts, you’ll have more time to focus on other important aspects of your work life. You can rest assured knowing that your accountant is on hand to minimise any stress you currently have.

To find out more about our services available for limited companies, please contact us today. We look forward to hearing from you and chatting soon.

Have You Got Any Questions?

Need to talk to someone? Get in touch with one of our consultants today and we will be happy to help.
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