How to Spot CCJs and Struggling Companies

County court judgments (CCJs) against businesses have long been on the rise, amidst a business landscape troubled by major economic challenges. The aftermath of the COVID-19 pandemic, escalating costs, tighter credit conditions, and an economic slowdown have all contributed to cash flow issues for UK businesses.

The final 3 months of 2023 alone saw a 15% increase in judgements (YoY), whilst the total value of judgments across all jurisdictions in Q4 2023 saw a year-on-year increase of 19%.

But how do you spot whether a company has a CCJ? And how do they impact commercial decisions?

Why do CCJs matter to businesses?

From a business’s perspective, CCJs are undesirable due to their impact on a company’s ability to get credit, including business loans. They’re also bad for reputation, with county court judgments publicly available on the UK Register of Judgments, Orders and Fines for up to six years.

CCJs can also be a risk signal for potential buyers or investors, suggesting that the company may have a cash flow problem or have fallen short of their wider fiscal responsibilities.

Of course, without lacking context, a company possessing a CCJ won’t give you the full picture, even if it’s still outstanding. However it can serve as an early indicator of a potentially risky business that requires further investigation.

How does a CCJ impact risk management?

Finding that a prospective business has a CCJ will pose a number of questions, depending on the sector you’re in.

For example, if you’re an SME or work in the sales space, a CCJ may affect your decision to do business with that company. Will they pay you on time (or at all)? And are they therefore a reliable, long-term, repeatable customer?

Meanwhile, a CCJ may also represent a compliance risk. So, when a company encounters a prospect with a County Court Judgment (CCJ), it sometimes triggers enhanced due diligence checks as part of AML (Anti-Money Laundering) and KYC (Know Your Customer) regulatory compliance protocols.

This is because a CCJ increases the risk profile of the prospect, necessitating a deeper investigation into their financial history and the specifics of the judgement.

This is particularly pertinent in public services and higher education. There is concerted pressure both from government and social & governance perspectives to work with more ethical companies (and to avoid relationships with problematic businesses).

In short, this involves asking yourself whether working with that company will reflect well on your own organisation or institution. In-depth due diligence checks are key in order to avoid these risks of reputational damage.

The link between CCJs and insolvency

Insolvencies are currently at a 14-year high according to research from DLA Piper, with the end of COVID-19 support schemes and rising energy costs amongst the main causes cited. And whilst CCJs are not directly to blame for the record number of insolvencies, they are undoubtedly a factor.

Registry Trust comments in its own research that reduced access to credit and borrowing is clearly detrimental to the survival of a company. In this particular research article, Registry Trust points to the time between companies receiving CCJs and subsequently becoming insolvent, finding that 47% of the businesses that went insolvent between May and June 2021 had at least one CCJ.

In a subsequent research article, the Trust explored the journey from a business acquiring a CCJ through to insolvency, expanding upon their original findings. Here they observed that 94% of companies that went insolvent did so within 955 days of receiving a judgement.

Factoring in the limits on borrowing and credit, amongst the other drawbacks that come with acquiring a CCJ, the link between CCJs and insolvency is clear.

Enter Risk Signals

Since we introduced Signals as a simplified view of our rich and complex datasets, they’ve been hugely popular — so, we recently launched even more. Meet Risk Signals.

Risk Signals are markers that flag companies that might be under financial scrutiny or operational pressure. We now track four Risk Signals on the platform:

• Liquidation and insolvency: Highlighting a company’s liquidation status
• CCJ: Companies with outstanding county court judgements (CCJs)
• Short runway: When a company has fewer than 8 months of reserve cash remaining
• Down round: When a company’s valuation is lower than a previous round of fundraising

Why use Risk Signals?

We believe that by better understanding the conditions of the companies you work with, you can better manage your own financial and reputational risk.

Whether you’re an investor, making your next sale, or looking for a strategic partnership, Risk Signals equip you with the insights you need to highlight companies that align with your strategy.

Where can you find Risk Signals?

You can find them in Advanced Search, company profiles, and exports, which is exactly where you find our Growth, Innovation, and ESG Signals.

How are CCJs tracked on Beauhurst?

When a County Court Judgement (CCJ) is issued, it means that the company has been taken to court over unpaid debts, and the court has ruled the company must pay back those debts.

Whereas CCJs remain on a company’s credit record for the full six years, only currently outstanding CCJs are displayed on the company’s profile. Once the debts have been satisfied, it will no longer have the signal.

In line with Registry Trust’s own processes, Beauhurst tracks outstanding CCJs going back 6 years, at which point they are removed from the register.

How Beauhurst subscribers benefit from identifying CCJs

1) Enhanced due diligence

Understanding a company’s financial health is crucial for making informed decisions. By identifying CCJs, Beauhurst subscribers gain insights into a company’s debt and risk history.

This information is vital for due diligence, helping subscribers to avoid partnering with or investing in companies burdened by financial issues. Knowing a company’s litigation and debt recovery history can also steer stakeholders clear of potential financial entanglements that could jeopardise their investments.

2) Identifying opportunities

CCJs can signal that a company is struggling, but this isn’t always just a red flag. For savvy investors, this could spell opportunity. For instance, a company with a CCJ might be a candidate for a buy-out, especially if the underlying business model is sound but temporarily undercapitalised.

Likewise, financial services firms can use this information for lead generation, targeting businesses that may be in urgent need of debt restructuring services or financial advice.

3) Support and intervention

For local governments and public sector entities, knowing which businesses and/or sectors are facing financial distress allows them to provide timely support. Whether it’s through direct intervention, facilitating access to business support services, or providing rate relief, spotting CCJs enables local authorities to proactively act and stabilise the local economy.

However, it isn’t just about spotting risks; it’s also about identifying potential for growth, intervention, and support. By transforming data into actionable insights, subscribers can make strategic decisions that align with both their business objectives and broader economic health.

How to arrange a demo of Risk Signals

Whether you’re in investment, a knowledge transfer partnership team, or a local authority, Risk Signals are an essential part of the due diligence process. 

And as of the latest update, the Beauhurst data platform now covers over 4.6m companies across 225 industries and 80 buzzwords, giving you access to the whole UK economy.

Want to see risk signals (including CCJs) in action? Book a demo to see how Beauhurst can help you spot the early signs of risk through CCJs and leverage opportunities with detailed financial insights.