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An Example Case of Credit Control's Impact on Legal Action |
Proper credit control has a bearing on when matters go legal and not only as preventative action. To illustrate this I will give you an example of what happened to me some time back. A client of mine had taken over another business and with this, had inherited shall we say a dubious credit control system. One of the debtors they inherited had a debt of R 180 000.00 which my client was feeling a bit nervous about. They had called the debtor into a meeting to discuss their repayment of the debt. The debtor had stated quite candidly that they could not pay the entire debt any time soon and then went so far as to tender a series of post dated cheques of R10,000.00 each per month. My client felt that this was unacceptable and that their business could sustain larger monthly payments of the debt.
So my client decided to call in the legal heavies, me, to throw the proverbial book at them. Based on the telephonic instructions I sent off a quick faxed letter of demand and asked my client to send over the credit application form with the post dated cheques. We were feeling rather bullish about the whole matter as on the face of it we had a combination of a signed credit application form with the post dated cheques as an admission of liability. We also knew that they had unencumbered assets exceeding the value of our claim. However that was before I started to do my homework and, as we attorneys in our legalese like to say, perused the credit application and the post dated cheques. The first thing I noticed was the cheques were drawn in the name of a partnership trading as the name of the business. On checking the credit application form I saw the business reflected as a close corporation with a similar name trading as a variation on what we thought was the name of the business. I then did a search on the South African Registrars Office website which showed five close corporation's of a similar name which all appeared to be registered to the same group of people. The CK number given on the credit application form tied up with a close corporation with a name which was the same as the supposed trading name of the close corporation. The net result was that from feeling very bullish and thinking that I'd get in with a quick knockout blow and get a speedy repayment of the debt, I had to box clever and longer as I was now in a position of uncertainty as to whom we had a contract with and which entity in fact owned the assets of the business. The situation which I, as an attorney, found myself in could have been avoided had the proper credit control steps been taken initially. The point being that poor credit control usually not only results in more matters getting to legal handover stage but also results in greater difficulties in legal enforcement, if not failure. |
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