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 Checking creditworthiness
A check of creditworthiness of the potential South African business partner
through banks or information agencies
before sealing a business contract is recommended.
Audited financial information
is widely available.
Information is also available from the Johannesburg Stock Exchange and from the
Stock Exchange Handbook.
A major area of concern are directors who repeatedly open companies, liquidate
them a year later, and then open other
enterprises, often using the same assets of the original companies.
This
practice is prevalent, and there are no restrictions
on directors using this tactic.
Investors and traders are therefore advised to check out the creditworthiness of
directors when assessing a buyer's ability to pay.
Letters of credit
When using a Letter of Credit it is recommended assure total compliance, i.e.
take care in presenting the necessary documents
in exactly the correct form.
Otherwise, delays in payment might have to be expected.
Retention of title
Retention of title (called Reservation of Ownership in South Africa) does apply
in South African civil law, particularly in
liquidation scenarios.
But the difficulty is that the law states that you must be in a position to
clearly identify the goods.
For example, if a shipment of computers is consigned, if you have the serial
numbers and they correspond to both the goods themselves and to the serial
numbers on the invoice/s, then there can be no dispute about the identity of the
goods.
Mortgage bonds
A mortgage bond over the debtor’s immovable property has to be issued by a
Registrar of Deeds and is registered with
the deeds office.
While ownership of the property remains with the debtor, the
creditor acquires the right, on default
of the debtor, to attach the concerned property and sell it in execution.
Mortgage bonds provide priority rights in case of a debtor’s insolvency.
Mortgage bonds are accessory.
Pledge
Pledges are also accessory. The creditor takes possession of the movable goods
until final payment of the debt, while
the debtor retains ownership. In case of default the creditor has the right to
sell the movable goods and discharge the debt with the proceeds.
Pledge contracts require no registration.
Suretyship
A suretyship is accessory and has to be agreed in writing.
Other safeguarding measures
Bills of exchange
Documentary collection
Guarantees
Bank guarantees
Collection of receivables in South Africa
Safeguarding your credit sales in South Africa
Protecting your credit sales in other countries
Reproduced by kind permission of Atradius
Atradius copyright. The statements and recommendations made herein are for
informational purposes only and should not be utilised as a substitute for
professional advice in specific situations. Therefore we ask for your
comprehension that we can't take over any liability for this report. If legal
advice or other expert assistance is required the services of a professional
should be sought.
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