Firstly it is important to understand how a business type is seen in the finance sector.
Basically a limited business is usually seen as an entity in its own right. The company will have its own registration number, be registered with companies house and of course the ever present HMRC, the tax office. The directors and owners of the business make decisions on behalf of the business and are in effect the controlling individual, the aim being to help the company perform well, pay its own way and behave in a legal manner.
So what happens when things go wrong?
In case of breaking credit agreements, breaking rules set by legislators, the government or regulators the business is the first point of call. For example You will have heard about businesses being fined for breaking rules etc.
Likewise creditors to the business can pursue monies owed to them by your company through the courts, as can clients who you have failed to deliver too etc. If this action is taken and your company subsequently loses the action in a county court the company will have a County Court Judgement registered against it.
This will show against the company for circa 6 years, but may have less of a negative impact if the business settles it as it should then show as a satisfied ccj. Thereby at least demonstrating that the company did at least settle the bill. Other lenders and companies can see when a company has incurred CCJ`s the amount and when. Clearly the impact here can be pretty severe.
Should you need to borrow to invest in your business, or seek fresh investment through new shareholders, having CCJ`s against the business may be a red flag to any such investors. Occasionally the damage may not stop there. In certain scenarios, where the Directors controlling the company have been negligent in their actions, further action may be taken against the individuals concerned.
This may result in a judgement against them in their own name which will affect their personal access to finance and certain job roles. They can also incur a disqualification from being a company director in the future for certain industries or at all.
Is the impact of a CCJ different if you are a sole trader?
There are other types of business but the limited company and sole trader set ups are the most common types. There are some key differences between the sole trader and limited company operations, which have various impacts – but for the purposes of this article the concept of ownership of the actions / liabilities is a major one. In short the sole trader is in him/her/their selves the company.
Importantly debts taken out or accrued are the liability of the sole trading person to ensure repayment. So if you have a debt that cannot be repaid when due then the creditor may opt to take you to court to recover their monies from you, or even your assets. My Sort Of Loan is a finance broker who offer a number of loan options for sole traders who may have CCJ`s or other credit issue`s.
Which creditors can take a business to court?
The creditors that can do this are not just limited to your bank, loan providers or commercial creditors, HMRC and Customs and excise also have the right to pursue monies due directly from the sole trading personnel. This can lead to one or more CCJ`s being registered against the individual. These will show on your personal credit profile for up to 6 years. Any creditor who you give authority to carry out a credit search can see the CCJ, the amount it was for, when it was incurred and whether or not you have paid it (termed satisfied).
Unfortunately this can have a negative impact on your credit score and rating. The bigger the CCJ, the newer it is and whether it has been satisfied or not vary how much of a negative it will be. Satisfying it will help with the reparation process. In terms of age after 6 years it should drop of your credit file and therefore not be visible to potential new creditors.
Having a CCJ on your credit file can impact on whether you can obtain a mortgage, higher purchase, loan, credit card or even buy now pay later deals. Having good business insurance and a solid solicitor behind you may help to curb these matters before they develop into a CCJ.