When a limited company owes you money, the recovery process is more complicated than chasing an individual debtor. The limited liability structure that protects company directors also limits your options as a creditor. But complicated does not mean impossible. With the right approach, recovering a commercial debt from a limited company is achievable, even when the debtor is being difficult.
This guide explains how limited liability affects your position, what steps to take before issuing legal proceedings, and what tools are available when a UK limited company refuses to pay.
Why Limited Companies Are Different to Chase
When a business trades as a limited company, it is a separate legal entity from its directors and shareholders. This means:
- You can only pursue the company itself, not the people who run it (unless a personal guarantee exists)
- Even if you obtain a judgment, enforcement is limited to assets owned by the company
- If the company has no assets or enters insolvency, recovery may be partial or nil
- Directors can resign, leaving no one with authority to respond to demands
None of this makes recovery impossible, but it does mean that preparation and intelligence gathering are more important than they are when chasing an individual.
Step One: Check the Company’s Status on Companies House
Before doing anything else, check the company’s current status on the free Companies House register at find-and-update.company-information.service.gov.uk.
You are looking for:
- Active: The company is trading and can be pursued normally.
- In administration: A moratorium is in place. You will need to file a proof of debt with the administrator and await the outcome of the administration process.
- In liquidation: The company is being wound down. File a proof of debt with the liquidator. Recovery as an unsecured creditor is unlikely to be in full.
- Dissolved or struck off: The company no longer legally exists. Recovering a debt from a dissolved company requires a court application to restore it, which is rarely cost-effective for smaller debts.
This check takes five minutes and can save you the cost of pursuing a debt that is already unrecoverable.
Step Two: Review the Company’s Filed Accounts
Companies House publishes a company’s latest filed accounts, which show its net assets, cash position, and outstanding liabilities. While small companies can file abbreviated accounts that reveal limited detail, even basic filings give you a sense of whether the company has assets worth pursuing.
Warning signs that enforcement may be difficult:
- Negative net assets (liabilities exceed assets)
- Significantly declining turnover year on year
- No fixed assets, property, or equipment listed
- Large existing creditors listed in the notes
- Accounts filed late or not at all (a Companies House compliance failure that often indicates financial distress)
A professional debt recovery agency can carry out a more thorough commercial credit and asset check before you commit to any legal costs.
Step Three: Send a Formal Letter Before Action
Before issuing legal proceedings, you are required by the Pre-Action Protocol for Debt Claims to send a formal letter before action (LBA). This should clearly state:
- The amount owed and how it is calculated
- The invoice number(s) and dates
- Any statutory interest and late payment compensation being claimed
- A deadline for payment (typically 14 days for commercial debts)
- The consequences of non-payment (legal proceedings)
A well-drafted LBA from a professional debt recovery agency carries significantly more weight than an informal demand from the creditor directly. Many limited companies pay at this stage to avoid the disruption and cost of court proceedings.
Step Four: Consider a Statutory Demand
For undisputed debts of £750 or more, you can serve a statutory demand on the limited company. A statutory demand is a formal legal document giving the company 21 days to pay in full, negotiate a repayment agreement, or set aside the demand by demonstrating a legitimate dispute.
If the company fails to respond within 21 days, this creates a legal presumption of insolvency, which allows you to present a winding-up petition. The threat of a winding-up petition is often enough to prompt payment: it is publicly advertised in the London Gazette and triggers an immediate freeze on the company’s bank accounts.
A statutory demand is not appropriate where the debt is genuinely disputed. Using one in those circumstances can constitute an abuse of process and expose you to a costs order.
Step Five: Issue a County Court Money Claim
For debts of any size, you can issue a County Court money claim against the limited company. The process is the same as for individual debtors:
- Issue the claim online at www.moneyclaim.gov.uk
- The company has 14 days to acknowledge and 28 days total to file a defence
- If the company does not respond, apply for a default judgment
- If the debt is defended, the claim proceeds to a hearing
Court fees are payable on issue and are usually recoverable from the debtor when judgment is entered. You can also add statutory interest at 8% above the Bank of England base rate and claim up to £100 in late payment compensation per invoice under the Late Payment of Commercial Debts Act 1998.
Enforcing a County Court Judgment Against a Company
Obtaining a judgment is only half the battle. If the company does not pay voluntarily following a CCJ, you need to enforce it. The main options against a limited company are:
High Court Enforcement Officers (HCEOs)
For judgments over £600, you can transfer the CCJ to the High Court and instruct an HCEO to seize the company’s goods, vehicles, equipment, and other assets. HCEOs have wider powers than County Court bailiffs and typically achieve higher recovery rates. Their fees are recoverable from the debtor on successful enforcement.
Third-Party Debt Order
A third-party debt order freezes funds held in the company’s bank account and redirects them to you. It requires knowing which bank the company uses, but if funds are present, this can be one of the fastest routes to actual payment following a judgment.
Charging Order Over Company Property
If the company owns commercial property or land, you can apply for a charging order. This places a legal charge on the property, securing the debt. You can then apply for an order for sale if the company refuses to settle.
When to Consider a Winding-Up Petition
A winding-up petition is a serious step that forces an insolvent company into compulsory liquidation. It is appropriate when:
- The debt is undisputed and over £750
- A statutory demand has been ignored
- You have reason to believe the company is insolvent
- The debt is large enough to justify the cost (petition fees and legal costs typically exceed £1,500)
When a winding-up petition is presented at court and advertised in the London Gazette, the company’s bank accounts are immediately frozen under the rule in Hollicourt (Contracts) Ltd v Bank of Ireland. This alone often triggers urgent payment, particularly from companies that are cash-poor but asset-rich.
Be aware: if the company is already insolvent, a winding-up may result in no payment at all, as unsecured creditors rank behind secured creditors, employees, and preferential creditors. A professional assessment of the company’s financial position is essential before petitioning.
Personal Guarantees: When You Can Pursue a Director
Limited liability protects directors from personal liability for company debts, but that protection disappears if the director has signed a personal guarantee. Personal guarantees are common in:
- Commercial leases
- Bank lending and invoice finance facilities
- Supplier agreements with smaller or newer businesses
- Trade credit applications
If a personal guarantee was signed, you can pursue the director individually for the guaranteed amount, regardless of what happens to the company. This significantly changes the recovery calculation: you can use all standard debt recovery tools against the director personally, including a statutory demand leading to a bankruptcy petition if the amount exceeds £5,000.
Always review any written agreements, terms and conditions, and credit application forms for personal guarantee clauses before concluding that the company is the only entity you can pursue.
What If the Company Is Dissolved?
If the debtor company has been struck off and dissolved, it no longer legally exists, and the debt technically dies with it. However, a dissolved company can be restored to the register by court order for up to six years after dissolution under the Companies Act 2006.
Restoration is rarely cost-effective for smaller debts but may be worth considering for large amounts. Once restored, the company can be pursued through normal debt recovery channels, and any assets that passed to the Crown on dissolution can be recovered.
Acting Early Maximises Recovery
The most important principle in recovering a debt from a limited company is speed. The longer you wait, the greater the risk that the company’s financial position deteriorates, assets are transferred or dissipated, directors resign, or the company is struck off. Debts that could have been recovered in full with prompt action become irrecoverable once a company enters insolvency.
Instructing a professional debt recovery agency at the first sign of non-payment is the most effective way to protect your position. Jack Russell Debt Collection handles commercial debt recovery from limited companies across the UK, including pre-legal collection, CCJ enforcement, statutory demands, and coordination with insolvency practitioners when required.
Contact Jack Russell today for a free assessment of your case and clear advice on the best route to recovery.
Disclaimer: This article is for general information purposes only and does not constitute legal or insolvency advice. For advice specific to your situation, consult a qualified debt recovery specialist or solicitor.
Frequently Asked Questions
Can I personally sue a company director for a business debt?
Generally, no. A limited company is a separate legal entity from its directors. You cannot sue a director personally for a company debt unless the director has personally guaranteed the debt in writing, the director has acted fraudulently or in breach of their fiduciary duties, or the corporate veil can be lifted in exceptional circumstances. Always check whether a personal guarantee was signed before assuming you are limited to pursuing the company alone.
What checks should I do before chasing a limited company for debt?
Before pursuing a limited company debt, check the company’s status on Companies House (free at find-and-update.company-information.service.gov.uk). Confirm the company is still active and not in administration, liquidation, or struck off. Check the latest filed accounts to assess whether assets exist to enforce against. A company in financial difficulty may not be worth the cost of legal action.
What is a winding-up petition and when should I use it?
A winding-up petition is an application to the court to force an insolvent company into compulsory liquidation. It can only be used for undisputed debts of £750 or more. Once presented, the petition is advertised in the London Gazette, which triggers an immediate freeze on the company’s bank accounts and can prompt swift payment. It is a powerful but serious step, generally reserved for debts over £5,000 given the costs involved.
What happens to my debt if the company goes into administration?
If the debtor company enters administration, an automatic moratorium prevents most creditors from taking action against the company without the administrator’s consent or court permission. As an unsecured creditor, you will need to file a proof of debt with the administrator. Recovery as an unsecured creditor is not guaranteed and often results in partial payment at best, depending on the assets available.
Can I get a County Court Judgment against a limited company?
Yes. You can issue a County Court money claim against a limited company in the same way as against an individual. If the company does not defend the claim, a default judgment is entered. You can then enforce the judgment using High Court Enforcement Officers, a charging order over company property, or a third-party debt order against company bank accounts. The company’s credit profile is also affected by any registered CCJ.
What is the difference between administration and liquidation for a creditor?
Administration is a rescue process aimed at preserving the company as a going concern or achieving a better outcome than liquidation. Creditors are frozen out during administration. Liquidation is the terminal wind-down of a company, where assets are sold and the proceeds distributed to creditors in a strict legal order: secured creditors first, then preferential creditors (e.g. employees), then unsecured creditors. Unsecured creditors typically receive pennies in the pound, if anything.
How do I find out if a limited company has assets worth pursuing?
Start with the company’s latest filed accounts on Companies House, which show net assets, cash, and liabilities. For a more detailed picture, a professional debt recovery agency can instruct commercial tracing and asset investigation services to identify property owned by the company, vehicles registered in the company name, and bank accounts or outstanding receivables. This intelligence is essential before committing to legal action.
