28 08, 2015

Freight Forwarders & Business Rescue

By |August 28th, 2015|Credit Law|0 Comments

Business Rescue has been introduced under the Companies Act, 2008 (“the Act”). By passing a simple resolution, a company may commence business rescue proceedings. One of the important consequences of doing so is that in terms of section 133 of the Act, there is a general moratorium on legal proceedings against the company. In other words, while the company is under business rescue, a creditor is prohibited from instituting legal action against the company to enforce the payment of a debt that would otherwise be due and payable by the company.  This article investigates what happens to goods in transit in a business rescue situation and sets out the steps that freight forwards should be taking to reduce the risks.

For companies that operate in the freight forwarding industry and/or that hold or convey goods for their customers, this poses significant risks, including the following:

the risk of demurrage, transport costs or warehousing costs for goods that are held by the freight forwarder at a time when the company is under business rescue; and
the possibility of not being able to enforce a suretyship or having the claim against the surety reduced in line with any approved business rescue plan (typically business rescue […]

9 12, 2014

Credit Documentation Checklist

By |December 9th, 2014|Credit Law|0 Comments

 

This is a basic checklist of the fundamental aspects that should be covered in credit documentation issued by corporates that provide credit to their customers

o    Suretyships / Payment Guarantees. Traditionally suretyships have been the most common form of security in credit transactions. They are subject to strict requirements and, surprisingly often, are found wanting. It is critical that suretyships are correctly formatted, worded and completed. There is a recent trend toward payment guarantees in place of suretyships.

o    National Credit Act Compliance. In the event that the debtor is a juristic person and it has an asset value or turnover above the threshold of R1 Million, the National Credit Act, 2005 does not apply to the transaction. It also does not apply to any related suretyship. A disclosure that either asset value or turnover exceeds the threshold is binding on the debtor.[1] Terms and conditions should also include a pivot clause that excludes any provisions of the terms and conditions that could result in the agreement being construed as a credit agreement (in relation to qualifying customers).

o    Business Rescue Provisions in Credit Application Form & Suretyship (NB). Approved business rescue plans can compromise claims and costs companies substantial amounts. To […]