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Wednesday, August 1, 2007
Fear kills reason

Deciding to appoint a new courier company we gave DPEx a chance. Although the agent was nice enough, the questionnaire was very detailed, and the company needed a surety. This was signed despite the fact it was quoting for a sole proprietorship.

The intention of a surety is to make an individual personally liable for any debts incurred by his company. A public limited or limited proprietary, or indeed a close coloration are distinct legal entities and can borrow, incur liabilities and be sued in their own right. The fear is that if a director over extends his company and its debts are not repaid he would otherwise be able to hide behind the ‘corporate veil’. His guarantee through surety means he can be made personally liable.
The fact this is irrelevant for a sole proprietorship – the owner is automatically personally liable - was lost on DPEx, until its accountant was reminded of the legal nicety. One wonders if the agent should not be FAIS-approved?
The real issue, however, is that service providers are having a hard time generating business and ensuring its customers pay up. It’s hard to see how a client could drum up R200 000 in courier charges but he did, and DPEx had difficulty in getting payment. Lack of debtor control, in addition to lack of legal skills, should be added to the company’s staff education programme (if it has one).
Another courier agent, providing us with a quote, was on her way to collect an R11 000 debt. It seems, for this company at least, the salesperson is responsible for the quality of his or her clients.
In any case, DPEx stumbled over another area of confusion and so lost the plot. It finally accepted the point as regards the surety ship, but then a funny thing happened. The company said because our business was a sole proprietorship it would need a deposit!
Does this mean that it spends all its time making a director personally liable, only to require a deposit from him should he not pay up? Sounds crazy.
Perhaps DPEx is just too nervous about its debtor’s book to see reason. Maybe it thinks sole proprietorships are less honest than companies. Who knows?
Frankly, any organisation that does not trust its customers is not worthy of trust. We did consider asking DPEx for its surety ship in case it defaulted on a R1 000 deposit, (to say nothing of any valuable cargo of ours it might steal) but thought better of it. DPEx did not get the business.
Moral of the story: businesses need to spend more time building personal relationships with their clients, treating them as real people rather than a list of names in a database. New clients should be innocent until proven guilty, not the other way round. Financial institutions should budget for this more personable approach. By Nigel Benetton

Copyright © Insurance Times and Investments® Vol:20.7 1st August, 2007
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