No creditor likes having to deal with a defaulting debtor. Matters become even more interesting when said debtor goes into business rescue. In such instances the creditor’s avenues of recourse become rather limited by the Companies Act – because a creditor is unable to sue its debtor while their debtor is in business rescue. What’s a hapless creditor to do? Particularly in the uncertain economy in which we currently live, where suppliers are increasingly at risk. One solution is to make use of suretyships. Before releasing goods or rendering services, request your debtor to provide some solid guarantors, eg. ask the shareholders, directors, trustees, members, holding company etc to sign a suretyship guaranteeing the debtor’s obligations.
“I have fought against white domination, and I have fought against black domination. I have cherished the ideal of a democratic and free society in which all persons live together in harmony and with equal opportunities. It is an ideal which I hope to live for and to achieve. But if needs be, it is an ideal for which I am prepared to die.”
(Nelson Mandela: Rivonia Treason Trial, 20 April 1964)
Are restraints of trade legal? Can they be enforced? Should I be worried about signing a restraint? Or is it true that a restraint of trade isn’t worth the paper it’s written on? The short answer is: restraints of trade are indeed legal.
Restraints are a common employment requirement and form an integral part of many employment contracts. Without a restraint in place, any employee who has access to key confidential information could cause serious damage to the business if s/he decided to leave and join (or startup) the opposition. But it is of critical importance that the restraint of trade has been properly worded if it is to stand up to the Courts’ scrutiny. South African law recognises the employer’s right to enforce restraints of trade in order to protect legitimate proprietary interests. But these interests must be balanced against the employee’s right to work and to earn a living.
A common dilemma facing employers is how to address the issue of a paying a bonus or thirteenth cheque. The best solution is to address this matter head-on, in the form of your employment contracts and related company employment documents. When you draft your employee bonus procedures, you may want to consider some of these suggestions.
- Do you want to include a thirteenth cheque in your policy? A thirteenth cheque is usually (but not always) a double-salary, usually (but not always) paid in December – and South African labour law does not obligate an employer to pay 13th cheques. If you’d like to consider alternatives to the traditional 13th cheque, you could also look at:
- Including a 13th cheque as part of the employee’s annual salary package, instead of an additional payment on top of their package. The employee would then get slightly less in their monthly pay-cheque, but would get the advantage of receiving an extra “bonus” once a year. It’s a little like a forced savings scheme. It goes without saying that you would need to administer this type of concept transparently and with the full, informed consent of your employees. And be very careful if you want to raise this initiative with existing staff. They will probably be suspicious about and resistant to any radical change in the structure of their salaries, and you can’t unilaterally impose these changes on them.
- Instead of paying the thirteenth cheque in December, which can dent the cash-flow somewhat, you can agree on another month, eg. the employee’s birthday month, or the anniversary of their appointment date.
- Open a separate savings account where you can transfer money each month, processed at the same time as the payroll. This way you can save the funds needed to pay staff their 13th cheques without suffering a cash-flow knock.
- Do you want to include provision for an employee bonus scheme? A staff bonus – and whether it’s paid, the amount paid, who it’s paid to – is usually (but not always) dependent on certain criteria being met. Here are some considerations:
- Is payment of the bonus conditional on the employee meeting predetermined performance criteria? If so, does the employee know what these criteria are? And how will you measure whether or not they’ve been achieved?
- How is the bonus calculated? Is it unique to each employee? Linked to an employee’s sales targets? Or dependent on the company making a profit?
- Perhaps you can allocate an amount into an annual bonus pool. This can be split amongst the staff, either equally, in proportion to their salaries, or in proportion to their performance (objectively measured).
- Think about how much discretion managers will have in awarding bonuses to their subordinates. And what performance tools will the manager use to objectively and fairly decide who gets what?
- Paying staff bonuses can have a noticeable effect on cash-flow. You could think about easing this impact by paying the bonus in monthly instalments, or payable in two or three instalments at specified dates during the forthcoming year.
You should also include an overriding clause noting that the payment of bonuses is entirely discretionary. And if the company does decide to pay a bonus, the amount paid would also depend on the company’s profits and financial situation at the time of the payment.
There’s nothing like a competition to raise the spirits. As they say, you’re not in it until you’re in it. But when you are in it, that’s when things start happening. The palms go clammy, the anxious knots eat at your stomach, and your nerves are all a-jitter. Your head computes that your chances of winning are even lower than your chances of your boss tripling your salary with immediate effect. Yet still, the ticket in your hand ignites a small flame of hope as you plead with your chosen deity to select your number out the hat. The challenge is that if there’re no promotional competition rules your entry might not even be legal.
A brainwave hits you while you’re out one evening with a group of friends, and your idea just pops out your mouth while you’re sipping your second G&T. As it happens, your friends think you’re a genius for coming up with such an innovative concept, and the next thing you know you’re all going into business together. The next morning you wake up with a sore head and a long list of to-do items scrawled on a paper napkin. Topping the list is the registration of a (Pty) Ltd. But do you know how to register a new company? Where on earth do you start? Traditionally you’d find a good accountant who could do it all for you. But the problem with start-ups is that while they’re full of good ideas, they’re generally empty in the finances department. The good news is that you don’t have to be an accountant to know how to register a new company. You can do it yourself online, at a far reduced fee than what an accountant would charge.
“A small debt produces a debtor; a large one, an enemy.” (Publilius Syrus) And in both instances, debts can also produce interest. But at what rate? This is the dilemma that many creditors encounter when faced with a recalcitrant debtor. When thinking of debt and interest rates, most people tend to think of their mortgage bonds, vehicle finance agreements and overdraft. And in these scenarios, debtors are generally left in no doubt that the banks will be charging interest and what that interest rate will be. The banks make sure of that! But what about other debtor-creditor scenarios that are so often over-looked? For example, suppliers who offer their customers thirty-day terms in which to pay. Or service providers who perform their services and then await payment from their customers. If or when the customer fails to pay, can the creditor charge interest on the outstanding amount? And if so, at what rate? The answer to the first question is “yes”. The answer to the second question is “it depends”.
If you’re a social media user then by now you’ve probably come across people going nuts over the coconut war that’s taken over Facebook. Briefly, the story is as follows:
It seems a woman named Jenna started a business called Coconut Connection, trading the enterprise as a sole proprietor. Over a few years she builds her brand, her client base and her Facebook page. In August 2016, she is joined in the business by a friend, Heather, and together they ride the coconut craze. Then, on 27 April 2017, Jenna wakes up to find that Heather has effectively locked her out of the Coconut Connection Facebook page by deleting her as an admin. In addition, it appears that Heather:
There’s one word that strikes fear in the hearts of business owners: Suretyship. It’s guaranteed to send them fleeing for the hills. Many businessmen and women have suffered untold abuse at the hands of creditors who have manipulated them using suretyships and guarantees. On the other hand, there’s many a creditor berating themselves for failing to get a suretyship before granting credit to their now defaulting debtor. Let’s face it: the suretyship can be a useful business tool. If used correctly, fairly and with clarity on the parameters. A suretyship can grant companies access to the credit they so desperately need, while giving creditors the comfort to release goods before payment is made. But there needs to be a balance between the competing interests of debtor and creditor. All too often we hear of creditors upsetting this balance by trying to claim more than what the surety originally bargained for.
It all seemed like a good idea at the time. Sitting around the table at the monthly management meeting, someone moans about how boring the company’s marketing has become. There’s no spark, no excitement! This triggers an avalanche of ideas culminating in a plan so deviously simple that everyone marvels that they haven’t tried it before. A competition! But not just any competition. Entry is secured only after the customer buys a minimum amount of product. Customers can also be persuaded to obtain extra entries, for a fee, of course. And at the end of it, the winner will be, *gasp* Mr B! Who happens to be the Big Boss’ husband. And who will, quietly and magnanimously, “return” the prize of an awesome overseas holiday to the company. The money raised from selling tickets will fund the marketing campaign, and the extra product sold will be a boon for company and sales staff alike. What you’d call a win-win solution! For the company, that is. You’ll forgive the customers for not embracing this scheme with the same sense of excitement.