Outstanding accounts, deceptive debtors and labour issues are just some of the issues that business owners must daily manage. It is important to ensure that you implement internal procedures and processes to protect your business against civil litigation and the heavy burden of legal costs if your debtors fail to pay their outstanding accounts.
Where do you start? If you render goods and services to a client in terms of a monthly repayment written agreement, you need to act pre-emptive instead of reactive. What does this mean? Get your paperwork in order! Ensure that you have a written agreement in place to assist you when your attorney starts the civil ligation process and issues summons against this debtor. Before rendering services in terms of a written agreement, you need to ensure the following mechanisms are in place:
- A written agreement with your client that is drawn up by your attorney and that is duly signed.
- A list of business references from your client (and potential debtor) – phone these references and asses the payment history of your potential client; this must be done with your client’s permission in the written agreement;
- A proper credit search and investigation – in this regard, you will find out if the potential client has civil judgements, been sequestrated and/or liquidated, and/or if they are behind with their credit agreement payments (this should also be done with the consent of your client);
- If the potential client is a juristic person like a closed corporation or private company, ensure they provide you with the company registration papers, including but not limited to the registration number;
- Have your attorney conduct a background search on the company to establish its credit history;
- If the potential client is a registered company, ensure that one of the directors signs as surety and co-principal debtor (this will help your attorney in the civil litigation process in case of debt collections);
- When conducting this type of business, contact your attorney to advise you on the applications of the National Credit Act www.justice.gov.za/mc/vnbp/act2005-034.pdf and Consumer Protection Act on your business.
If you have your paperwork in order, it will be easier for your attorney to start a civil litigation process against any debtor who fails to make payments as agreed. Unfortunately, there are no guarantees in the process of civil litigation, but taking these steps can improve your chances.
If you struggle with any debtor(s), contact us per email at firstname.lastname@example.org for assistance in civil litigation and debtors.
(This article is an information piece and not a formal legal opinion. HFG Attorneys accepts no liability for damages caused by errors and omissions)