At SLKB Attorneys, we understand that navigating debt collection is often a complex and emotionally taxing process for businesses. In our recent webinar, hosted in collaboration with the JCCI, Director Fernando Lengert unpacked the intricacies of debt recovery in South Africa and cross-border jurisdictions. Whether you’re a small business or an established enterprise, these insights will empower you to make informed, legally sound decisions.
We’ve also included video clips throughout the article that highlight essential aspects of the conversation. Let’s dive into this complex topic.
Can You Recover Debt Without a Written Agreement?
One of the most common misconceptions in debt recovery is the belief that only written contracts are enforceable. In reality, oral agreements remain legally valid under South African law. If you can show consistent payment history or provide oral evidence that meets the necessary legal thresholds, you can succeed in court – even without a written contract.
As Fernando aptly noted, debt collection is more of a marathon than a sprint. Costs can vary dramatically – starting from as little as R5,000 and potentially escalating to over R100,000, depending on the complexity and resistance from the debtor. Starting early is often the best strategy.
Documentation Is Your Best Defence
In debt collection, preparation is everything. Having comprehensive records – such as delivery notes, signed invoices, and service agreements – can streamline your path to a successful judgment. Fernando stressed that the burden of proof lies with the claimant, and having a detailed paper trail significantly boosts your chances of success.
Other vital points include:
- Know Your Client (KYC): From registered names and addresses to banking details, upfront due diligence simplifies recovery later.
- Terms & Conditions: These can pre-determine jurisdiction, interest rates, and even allow for recovery of legal costs on a higher scale (attorney-and-own-client basis).
Reducing Risk Through Smart Contracting
Fernando explained how sound contractual practices – such as including a suretyship clause or securing guarantees – can safeguard your business. Particularly for new or high-risk clients, requesting directors to stand surety may be your best protective measure.
He also emphasized the importance of plain language in contracts: if your team and your client don’t understand your terms, they can’t be relied upon in court. Clear contracts not only make your intentions obvious but can also serve as deterrents to non-payment.
Legal Processes: Action vs. Application Procedures
The collection process through litigation involves several phases – from demand letters and summons to trial and execution. Two primary procedures were discussed:
- Action Procedure (standard litigation with trial): More time-consuming but allows for oral evidence.
- Application Procedure (motion court): Faster, reliant solely on written affidavits and documents – best used when no factual disputes exist.
Understanding the difference between these procedures helps businesses choose the most efficient path based on the complexity of their case.
Cross-Border Collections & Partnering for Sustainability
SLKB’s partnership with JCCI supports SME growth through sustainable legal practices. When dealing with African clients, forex restrictions often become a barrier. While these challenges can sometimes be legitimate, they are also frequently used as avoidance tactics. A robust legal agreement that includes arbitration clauses enforceable internationally can mitigate these issues.
Fernando encourages businesses to act early. Waiting too long can risk “prescription” – a period of three years after which debts are no longer legally recoverable.
Final Thoughts: Start Early, Stay Informed, and Seek Legal Guidance
Debt collection is rarely straightforward, but with the right information and legal support, you can significantly improve your success rate. Whether you’re drafting your first credit agreement or looking to recover outstanding payments, SLKB is here to assist with practical, expert legal guidance tailored to your needs.
📩 Need advice? Contact Fernando Lengert at frl@slkb.co.za or reach us directly at +27 (0) 11 482 1431.
👉 Follow us on Instagram @slkb_inc for more educational insights and updates on upcoming webinars.