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Now Creditors Can Apply for Directors to be Declared Delinquent – Why is That Important?

“He who is quick to borrow is slow to pay” (Old proverb) A recent High Court decision means that, for the first time, creditors of debtor companies are specifically cleared to apply for the company’s directors to be declared “delinquent” in certain circumstances. And that has significant implications for both directors and creditors. For directors – major long-term career risks Company directors need to manage a whole range of duties, responsibilities and risks, including being declared “delinquent” in terms of the Companies Act.

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Debt Collection – Two Recovery Options

“Creditors have better memories than debtors” (Benjamin Franklin) How well you manage your debtors’ book, and how successful you are in actually collecting monies due to you, should always be a management priority. It can spell the difference between a successful, profitable business and a failed one. If you are new to the game (the owner of a new start up perhaps), the debt collection process might seem confusing and a bit intimidating, but it needn’t be. If you need to understand the

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Don’t Give a Loan or Credit to Anyone (Not Even a Friend) Without Legal Advice!

“The requirement that credit providers must be registered allows for their control and regulation, especially in relation to their financial probity and integrity, thereby avoiding the unscrupulous exploitation of credit consumers by so-called fly-by-night operators and loan sharks.” (Extract from judgment below) A recent High Court case highlights once again the dangers of lending money, or granting credit, in contravention of our credit laws. By understanding the pitfalls associated with being an unregistered credit provider and of not complying with the

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Creditors: How to Secure Your Claim with a Notarial Bond

You should always take as much security for your claims as you possibly can before advancing credit or lending money to a debtor. That’s because if your debtor fails and is “liquidated” (if a corporate) or “sequestrated” (if an individual), without security you will have only a concurrent claim in the estate. And with a concurrent claim, you will be lucky to get back more than a few cents in the Rand, because you will rank right at the bottom of

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It’s Not Simple to Sell a House in Execution (Even if a Trust Owns It)

“A court shall not authorise execution against immovable property which is the primary residence of a judgment debtor unless the court having considered all relevant factors, considers that execution against such property is warranted” (High Court Rules) Selling a house in execution is not as simple as getting judgment and sending the Sheriff of the Court off to arrange a sale. This article is important to you if – You are about to lend money to, or do business with, an individual (or

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Directors – When Are They Personally Liable?

“… for the benefit of immunity from liability for its debts, those running the corporation may not use its formal identity to incur obligations recklessly, grossly negligently or fraudulently. If they do, they risk being made personally liable.” (Quoted in the judgment below) Particularly in hard times, it is not at all uncommon to find yourself unable to recover a debt from a company in financial straits whilst at the same time you know that its directors hold assets in their

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The Trouble with Family Loans: A R540,000 Lesson

“How sharper than a serpent’s tooth it is to have a thankless child!” (Shakespeare) “Family helps family in times of need” – that’s been part of human culture since long before the dawn of history but be sure to observe all legal formalities. A recent High Court decision provides an excellent example of the risks of not doing so. Parents lose R540,000 A daughter in the middle of a divorce borrowed R540,000 from her parents so that she could buy out her spouse’s

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Debtor Not Paying? Consider a Liquidation Application

“When debtors once have borrowed all we have to lend, they are very apt to grow shy of their creditors’ company” (John Vanbrugh) Bad debt is a major issue for many businesses in these hard economic times – not taking robust steps to collect it could be fatal to your own financial position. So if you are being given the run-around by a recalcitrant corporate debtor, take advice on whether an appropriate and cost-effective remedy for you might be an application for

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Suing a Debtor – Make Sure Your Victory Isn’t a Hollow One

“Pyrrhic victory”, n. A very costly victory, wherein the considerable losses outweigh the gain, so as to render the struggle not worth the cost (Wiktionary) With our economic woes unlikely to abate any time soon, expect an increasing number of your debtors to find themselves in financial difficulty. If you end up litigating against any of them the last thing you will want to do is to throw good money after bad. And whilst fighting a court case and winning against a

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Can Your Bank Take Your Money Without Permission?

“A bank is a place that will lend you money if you can prove that you don’t need it” (Bob Hope) A recent High Court decision has settled the knotty question of whether your bank can take money it holds for you in one account to cover your debt to it in another, without your permission and without notice to you. Firstly, what is “set-off”? To understand how important this new decision is, we need to go back to our common law (unwritten

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