If your company has had a County Court Judgment, or CCJ, made against it, then the creditor who obtained the judgment has several different options available to them to enforce that judgment. These include:
1. Charging Orders
2. Third Party Debt Orders
3. Bailiffs and Sheriffs
Clearly allowing a creditor to take any enforcement action against the Company and its assets is not ideal.
So what steps can you take to protect your Company if a creditor seeks to enforce a County Court Judgment?
If your Company has had a CCJ made against it, you must act quickly to ensure that the creditor does not take any of the actions outlined above because it may cause your company difficulties in continuing to trade. The formal insolvency options available to you are:
Creditors Voluntary Liquidation
The relevant section in the Insolvency Act 1986 is Section 183, which states that "if a creditor has issued execution against the goods or land of a Company...and the Company is subsequently wound up, he is not entitled to retain the benefit of the execution or attachment against the liquidator unless he has completed the execution before the commencement of the winding up".
The key issues are "completion" of the execution and "commencement of the winding up".
In respect of completion this means when the money from the sale of the Company's assets is received by the instructing creditor. In the context of a Creditors Voluntary Liquidation, commencement is when the creditor receives notice of the shareholders meeting to pass the necessary resolution to wind up the Company.
What this means, is that should a sheriff or bailiff have seized assets of the Company, you can prevent them from being sold by signing notices to place the Company into Creditors Voluntary Liquidation. Whilst the Company will be entering into Liquidation, the jobs and business in the Company can be saved by way of a Phoenix Company.
Notices can be prepared, signed and issued very quickly in order to notify the bailiff or sheriff, before they even attend at the premises.
Company Voluntary Arrangement ("CVA")
Another option is a Company Voluntary Arrangement ("CVA") with a "moratorium" to prevent creditor action.
A CVA is an agreement between the Company and its creditors to pay the outstanding liabilities over a period of time, typically three to five years. If the Company cannot afford to pay the debts in full, the offer to the creditors could be for payment in part.
A moratorium would afford the Company a "stay of execution" or breathing space, against any creditor enforcement until the result of a vote on the CVA by the creditors is concluded, and is relatively quick and easy to do.
Another option available to the Company when facing enforcement action is to place the Company into Administration.
As Administration automatically provides the Company with a moratorium and therefore would safeguard the Company's assets immediately by simply filing a short document in the Company’s local County Court, which then gives the directors and nominated Administrator, two weeks to work out a plan.
Once a Company is in Administration, the Administrators will be in control of the Company and can decide whether to continue to trade the business with a view to selling it as a going concern or cease trading and look to sell the assets of the Company.
Administration can often be a “stepping stone” to another insolvency process, for example a CVA, if the Administrators and the directors agree that that would be the best option available to the Company and its creditors.
The Directors of the Company would be able to buy the business of the Company and preserve the jobs of the employees, as long as theirs was the best offer once the business had been properly marketed.
Administrations, and in particular pre-packs, are often unpopular with creditors, despite them being a good tool for obtaining better returns for creditors. Accordingly, transparency, good communication with creditors, and dealing effectively with the high amount of regulation surrounding pre-packed sales, is key.
When your company has received a CCJ, and assuming it cannot settle it immediately, and the creditor is taking enforcement action, it is important to take immediate action and advice to understand the options available and what could work in your particular circumstances; particularly if you want to safeguard the company’s assets and underlying business.
If your company has received a CCJ which it cannot pay, or if a creditor is taking enforcement action, please do not hesitate to contact us for a free first meeting to discuss the matter further on 01326 340579.