Page 16 - JCCI Business Focus Vol.1.3

DEBTORS NOT PAYING? CASH FLOW PROBLEMS?

Henco de Kock can’t pay Company C because Once judgement is obtained it be your biggest client or customer, Financial Instruments As
Company A owes him money as is registered against the debtor in this case instituting legal action Security:
ynamic an example; say Company B is and remains valid for a period straight away may very well ■ Cession in Securitatem Debiti
Debt placed under liquidation due to of 30 years or until such time as cause the end of your business ■ Out-and out cession
DSolutions, the cash flow restraints caused by and when the judgement debt relationship.
aside from the non-payment by Company A. is settled. It is common that the Immovable Property As
providing Let’s further assume that Company debtor would propose a down What Should Be Done? Security:
debt collection C was a supplier and holds no payment arrangement as he Secure your debt! As soon as ■ Special Mortgage of Immovable
services, in security for its claim against would in all probability not have you come to the conclusion that Property as set out in the Deeds
a nutshell, Company B. Bear in mind that the wherewithal to settle the a certain debtor may not be able Registries Act 1937.
provides its concurrent creditors, which are judgement debt by way of lump to meet its commitments to you,
clients, most usually your suppliers, stand last sum payment. You can then either you should consider strengthening Separate Legal Entity:
of whom find in the queue as far as payment in obtain a writ of execution, and your position by obtaining security ■ Suretyship 
themselves respect of pre-liquidation claims instruct the sheriff to attach and over the debtor’s assets. Should
in financial are concerned. A liquidator auction off assets equal to the you then have to institute legal Tel 086 155 2288
distress, with a solution. This is is appointed and succeeds in value the judgement debt or decide action you will be in a comfortable hendrik@ddsol.co.za
achieved by identifying certain collecting the debt that is due by to allow the debtor to down pay position to do so. There are various www.dynamicdebtsolutions.co.za
obstacles and providing a solution Company A, but Company C is the judgement debt. Should the forms of security that can be
as to how to overcome these a concurrent creditor, its claim judgement debt not be satisfied obtained inter alia:
obstacles. ranks at the bottom of the list the next step would normally be
to apply for liquidation, which will
The economic reality is that your of payments to be made. As a put you, as a concurrent creditor, Movable Assets As Security:
company probably owes money to result, Company C is unable to in a less than desirable position. ■ Pledge
a supplier or service provider, as pay Company D and due to non- ■ General notarial bond
a result of debtors that are unable payment by Company C, Company In many instances the non- ■ Special notarial bond
or simply unwilling to meet their D is unable to pay Company E and paying or slow paying debtor may
commitments and pay you on so the cycle continues.
time, or at all.
Avoiding Bad Book Debt
This has caused companies
across South Africa to experience The agreement with your
severe cash flow problems and has customers and/or clients should
essentially lead to the liquidation be your first point of reference. If
of multiple companies, the payment terms are strictly 30
notwithstanding the fact that days, you should keep your debtors
many of these companies had a to it. Monitor and track payments.
substantial asset portfolio. The If your book debt reaches 90
liquidation of listed companies days, chances are that you will
such as Protech Khuthele experience cash flow problems
Holdings Ltd and Sanyati soon enough. So be persistent and
Holdings Ltd and their affiliated strict; the baby that makes the most
entities are good examples. These noise is always attended to first.
companies experienced sudden
cash flow restraints due to non- Once a debtor has reached 90
paying debtors. days you should consider taking
action. The most common remedy
This creates a domino effect. Let’s in South African law is to issue
use the classic case of Company B summons and obtain judgement.

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