Letters to the editor – August 2020

August 1st, 2020
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PO Box 36626, Menlo Park 0102

Docex 82, Pretoria

E-mail: derebus@derebus.org.za

Fax: (012) 362 0969

Letters are not published under noms de plume. However, letters from practising attorneys who make their identities and addresses known to the editor may be considered for publication anonymously.

Apology

I wrote an article titled ‘Walking a tightrope: The business rescue practitioner’s challenge of serving competing interests’ 2020 (July) DR 10.

It was brought to the attention of De Rebus and subsequently to myself by Dr Lézelle Jacobs that my article had failed to appropriately recognise her doctoral thesis titled: ‘Die Vertrouensverpligtinge van Ondernemingsreddingspraktisyns: ’n Regsvergelykende Studie’ (LLD thesis, University of the Free State 2015) and that it contained ideas, which were originally espoused in her thesis.

Dr Jacobs had conducted research into the fiduciary duties of business rescue practitioners, which had been the first of its kind in South Africa (SA). Dr Jacobs’ doctoral thesis was the first to conceptualise the four groups of stakeholders to whom a business rescue practitioner owes their duties in SA.

Although I had mentioned these four groups in my article and had mentioned Dr Jacobs’ thesis, the way in which I did so, had over-simplified the position adopted by Dr Jacobs in her thesis without recognising that she had also advocated for a flexible approach by the business rescue practitioner vis-à-vis these four groups as I had done. I wrote my article a few months after I had read excerpts of Dr Jacobs’ thesis and I appear to have underestimated the influence that her ideas had had on my understanding of a business rescue practitioner’s duties, with the result that I did not appropriately recognise her contribution to some of the assertions made in my article.

For this I hereby publicly apologise to Dr Jacobs and would like to express my thanks for her acceptance of my apology. I would also like to express my gratitude to her for her research, which has played an important part in how I understand a business rescue practitioner’s duties.

Ricky Klopper LLB (UCT) BCom (Actuarial Science) (Stell)
is a legal practitioner at Hans Klopper Inc in Stellenbosch.

 

Are your debt obligations subject to debt review?

For one’s financial affairs and the administration thereof to be subjected to debt review, their debt obligations need to be in a state of ‘over-indebtedness’ as defined by the National Credit Act 34 of 2005 (NCA). This is determined by a debt counsellor by referring their client’s debt obligations and income to the court by way of an application, demonstrating to the court that their client is unable to repay their minimum monthly instalments and still have adequate funds for the upkeep of their family. Debt review is the process where a debt counsellor assesses a client’s outstanding debt obligations and implements a debt restructuring and debt repayment plan. This is done through a process of negotiating reduced interest rates with credit providers, reducing instalments and extending the debt repayment terms.

Most debtors approach debt counsellors in desperation, and without being properly informed by the debt counsellors of their rights. This leads to the debtor’s expectations not being met. One of the most common mistakes that debtors make is failing to request a contract in writing from the debt counsellors, which fully sets out the obligations to be met by both parties. A very important obligation that most debtors neglect to bring their attention to, is the administrative fee payable to the debt counsellor. It is very important that the debtor factors this fee into their expenditure, in order to budget for their contribution towards their debts. It is important that the debtor is also aware, that by being placed under debt review, they will lose control of their financial affairs and in particular the ability to obtain further credit.

In order to understand how a consumer may be released from debt review, legal practitioners need to know what the NCA provides in this regard. In terms of s 71 of the NCA, a consumer whose debts have been restructured (placed under debt review) is entitled to a clearance certificate within seven days after –

  • all debts have been paid in full;
  • all obligations under the credit agreements are satisfied;
  • the debtor demonstrates future ability to satisfy credit agreements related to a mortgage bond.

Once the above has been met, the debtor should be removed from the debt review.

The real benefit of debt review is that it can protect one’s assets from being repossessed or attached by the credit provider. The disadvantage is that one cannot apply for any credit while under debt review and the only way to exit the review is to settle all outstanding debts, except for vehicles financed through a financial institution and for one’s home, which is subject to a mortgage bond. Most importantly, when under debt review, clients are legally protected by the NCA and creditors are no longer allowed to institute proceedings against them.

Shirleen Kamfer Phiri LLB (UWC) is a legal practitioner
at Kamfer Attorneys Incorporated in Pretoria.

This article was first published in De Rebus in 2020 (Aug) DR 4.