The legal means by which business can secure credit being offered to customers is by the various legal measures providing for credit security.
Typically, credit security falls into one of two legal categories, namely, real security or personal security. The former secures the obligation(s) owed in regard to the entire world while the latter secures the obligation(s) owed only in respect of the juristic person or the debtor him/herself.
The former also provides a greater measure of protection in the event of the debtor’s insolvency or liquidation.
The following credit legal instruments are available each having their own unique legal requirements and provisions for enforcement against defaulting debtors:
- General or specific credit agreements and bonds (such as incidental credit agreements or specific agreements, and bonds such as general notarial bonds or special notarial bonds);
- Mortgages which generally secure rights to immovable property or land;
- Pledge agreements which secure movable property (the Security by means of Movable Property Act 57 of 1993 is relevant);
- Liens, which typically secure goods in respect of services rendered;
- Cession, being either out- and- out cessions or together with cession in securitatem debiti;
- Hypothecs in regard to movable property and legal claims;
- Suretyships in regard to personal debts for individual or several debtors.
Depending on the type of business products or services offered and the accepted level of risk, one or more of these instruments can be utilised (sometimes together as opposed to in the alternative) to secure credit being offered by the business.
Doing business prudently with adequate credit security in place for debtors’ obligations together with a sound debtors’ book management system is vital for successful business especially in regard to consumer related sales.
Utilising expert credit security legal expertise places your business at the forefront of it’s potential to maximise credit sales opportunities.
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