Did you miss a credit card payment?

Think twice before you ignore your mail.

During the festive season people tend to go a little overboard with credit card spending and often choose to forget about the reality that they have to repay this money, with interest, at some point in the future.

This trend of overspending is the cause of many people finding themselves in trouble when they cannot make a payment or two on outstanding credit and usually leaves the lenders on their hind legs.

If you find yourself in this situation it is important to remember that it's never a good idea to simply ignore the situation. By ignoring the issue in the hope that it will sort itself out or will disappear, only worsens the situation and your own position. It is always in your best interest to contact your credit provider as soon as possible in order to make arrangements to settle overdue payments, to halt any pending legal action that may be taken against you and prevent further legal costs.

It is also in your best interest to make arrangements for payment before any action is taken, but circumstances often dictate otherwise. If you are not in a position where arrangements can be made with the credit provider, the credit provider is entitled to take legal action against you to recover all arrears plus costs, by way of summons.

The first step that must be taken against you to kick-start such action, would be to issue a letter of demand in terms of Section 129 of the National Credit Act, in which you are remanded to bring the outstanding balance up to date. It is very important to never ignore this letter of notice and to contact a lawyer immediately to advise you in this and to determine the best way forward.

Many people have a misconception that it is a requirement for a credit provider or his legal counsel to prove that you have personally received this Section 129 notice, before they can proceed with further legal action. This point of view was however denied in the matter between Sebola v Standard Bank and the Judge found that the credit provider must provide more evidence than the mere fact that they have indeed sent the Section 129 letter by registered mail, by supplying proof that the letter was delivered.

The Constitutional Court found that this means that the credit provider has to prove only that the letter was sent by registered mail and that it has reached the correct post office. It is not necessary to prove that the debtor has personally received the letter, but only that the letter was delivered to the correct post office. This means that you cannot circumvent the law by simply ignoring your registered mail by not collecting it.

The ideal is to respond immediately when reminders of credit providers and / or creditors are received.

If you have any doubts about how to handle such a situation, please contact Lizelle Jacobs in George and Melissa Medea in Mossel Bay at 044 601 9900. www.rgprok.co.za / office@rgprok.co.za .

What is Business Rescue?

Restructuring of companies in financial distress is on the increase globally. In line with this trend, Chapter 6 of the new Companies Act, No 71 of 2008 (the Act) introduced business rescue to the South African business landscape. Business rescue proceedings are defined by the Act as proceedings to facilitate the rehabilitation of a company that is financially distressed, i.e. a company which is unlikely to pay its debt as it becomes due within the immediate ensuing six months, or a company that is likely to become insolvent within that time.

Business rescue proceedings are therefore primarily aimed at “rescuing” a company that is in a grim financial position by:
1.    placing the company in the hands of a business rescue practitioner to take over the day to day management of the company and to take control over its related assets;
2.    prohibiting creditors from enforcing claims against the company during the course of business rescue proceedings;
3.    allowing the business rescue practitioner to develop and implement a business rescue plan in terms of which the company may effectively trade itself out of the financial position it finds itself in.

In practice, the board of directors of the company will pass a resolution to apply for business rescue, after which a business rescue practitioner is appointed. Alternatively, an affected person, (per definition includes shareholders, creditors and employees and/or employees’ trade unions), may also apply to the High Court for the company to be placed under business rescue. 

Once in business rescue, the business rescue practitioner will take control of the company for the duration of the business rescue proceedings and will then proceed to:
1.    investigate the affairs of the company;
2.    conduct meetings with creditors and;
3.    propose a business rescue plan, which, if accepted, will enable the company to continue trading and pay off its debts.

Employees who were employed by the company prior to the institution of business rescue will, in accordance with Section 136 of the Companies Act, remain employed by the company except to the extent that the changes occur in the ordinary course of attrition or if the employees of the company, in accordance with the applicable Labour Laws, agree to different terms and conditions. In any event, any retrenchment of any such employees which may be contemplated in the company’s business rescue plan is subject to the Labour Relations Act.
The main focus of business rescue proceedings is to enable a company to continue trading without the risk of creditors enforcing claims for payment of debts and, in certain circumstances, apply for the liquidation of the company.

Business owners often wait too long to exercise the more desirable option of business rescue, or the business is not able to trade itself out of trouble. In both instances it is likely that liquidation proceedings will be instituted against them. It must be noted that it is possible for a company that has been originally finally liquidated, to obtain relief in the form that the liquidation may be suspended and the company be placed under business rescue.

For more information on this topic, feel free to contact Danie Acker or Basson Piek of Rauch Gertenbach Attorneys at 044 601 9900, office@rgprok.co.za , www.rgprok.co.za/blog .