In a cession in security, the cedent transfers its right of action to a debt owed to it, known as the principal debt, to the cessionary as security for. A cession of book debts is a security undertaking that is generally utilised where one entity for example a bank or a company the lender lends and advances money the loan to another entity the. The cedent, the cessionary and the moratorium quo vadis. Cession is a bilateral juristic act whereby the cedent transfers its rights to the cessionary. Explanatory notes for the cession of book debts a cession of book debts is a security undertaking that is generally utilised where one. Cession is a particular method of transferring rights in a movable incorporeal thing in the same manner in which delivery traditio transfers rights in a movable corporeal thing. Including cession of book debts and suretyship in these conditions the goods means the goods indicated on any company forms, letters, price lists, quotations, delivery notes, orders or invoices. Factoring is a financial transaction and a type of debtor finance in which a. The class b preference shareholders required security for the secured obligations and the company was willing, subject to.
Can cessions in security be suspended in business rescue. Note that the cession of book debts can be used to cover debts that already exist and debts that may arise in future. Advances against book debt are not looked with favor by the banker. The cession of incorporeal rights is a legal principle on which significant amounts of money are transacted in the south african market. An outandout cession, where title to the property is transferred to the cessionary, subject to the cedants right to have the property transferred back to it by the cessionary once the debt, or other obligation. Cession claim by cessionary duty of insurer as debtor buy and sell arrangement. The only time a pledge construction will be upheld is when the possibility of an outandout security cession is. Ceded rights on the terms and conditions set out in this agreement. Guidelines from the aforementioned rulings, it would appear that the. By signing a cession of book debts contract, the debtor agrees to transfer to the creditor the right to claim money that is owed to the debtor by the debtors debtors. Subsequent thereto, the company is placed under supervision in terms of ch 6 of the companies act. The nature of cession in security cliffe dekker hofmeyr. A cession of rights as security may include rights which only come into existence in future as in the cession of future book debts.
Chapter 14 cession summary the law of contract in south africa. Insurers, being debtors under the policies they issue, are at risk if they pay out to the. Because, this is, after all, unsecured in nature and a clean advance, for. A session on cessions of debtors in business rescue hogan lovells. Chapter 14 cession summary the law of contract in south. Reseller application, credit application, cession of book debts, covering deed of suretyship all such documents constituting the application iwe, the undersigned the. Including cession of book debts and suretyship in these conditions the goods means the goods indicated on any company forms, letters, price lists, quotations, delivery notes, orders or invoices, including the documents of any of the companys or customers agents. A transfer of debt, and all the rights and obligations associated with it, from a creditor to a third party. Debt assignment may occur with both individual debts and business. Subsequent thereto, the company is placed under supervision in terms of ch 6 of the companies act 71 of 2008 the act namely, the provisions relating to business rescue. Franke south africa pty ltd cession of book debts page 3 of 6 version 1. Cr119 cession claim by cessionary duty of insurer as. A session on cessions of debtors in business rescue.
The only time a pledge construction will be upheld is when the possibility of an outandout security. A cession is the act by which a personentity known as the cedent transfers their personal right to another known as the cessionary. Book debt meaning in the cambridge english dictionary. Book debt represents payments due the company by customers typically in the form of accounts receivable.
The cession can be constructed as an out and out cession or as a cession in security. Franke south africa pty ltd cession of book debts page 5 of 6 version 1. The book teaches techniques for dealing with pesky bill collectors and paying off past due debts. Terms and conditions of sale including cession of book. Cession of accounts and debt collection guidelines. Warranty and liability for damage it is hereby agreed that the cedent does not provide. This cession of book debts agreement may be used where a debt is owed or may in the future be owed by a debtor, and additional security is required. The book debts were delivered by ft to nedbank by out and out cession with nedbank acquiring full ownership thereof. The cession can be constructed as an outandout cession or as a cession in security. By signing a cession of book debts a debtor therefore agrees to. Factoring and cession of debtors explained inoxico. This clause 7 applies to book debts to the extent that. When at the future date the book debts come into existence then, without more and without any further obligation.
Cession is a bilateral juristic act whereby the cedent transfers. Cliffe dekker hofmeyr the nature of cession in security. In securing the debt, the bank takes cession in securitatem debiti of all the companys book debts. A detailed summary of concessionary agreements, cessions in security, pledges and the lega. When at the future date the book debts come into existence then, without more and without any further obligation they become the property of the cessionary. In our view, it is clear that business rescue practitioners may not lawfully suspend a cession of book debts or for that matter any security right which a bank may enjoy. At all times the customer must keep up to date financial books. Firstrand bank ltd v nedbank ltd 124917 2019 zasca 47. The deed was headed cession of book debts and provided that n ltd did.
Zero debt contains a practical financial plan that can be put into action right away. The book value of debt is commonly used in liquidity ratios, where it is compared to either assets or cash flows to see if an organization is capable of supporting its debt load. When a company cedes book debt, they are effectively giving some creditor the rights to. A session on cessions of debtors in business rescue lexology. A cession of book debts confers rights on the bank more generally on the cessionary without a corresponding obligation on the part of the cedent. The case has been trenchantly criticised by professor susan scott and correctly so who pointed out that the purpose of the cession was to secure the bank overdraft.
Book debts is the term used for sums of money owed to the bankrupt, partnership or company at the date of the insolvency order. Generally, accounts receivable refers to the total amount due and is considered in calculating. Usually a cession of book debts takes place in terms of an outandout security cession. A cession of book debts is a security undertaking that is generally utilised where one entity for example a bank or a company the lender lends and advances money the loan to another entity the borrower, or which may in future lend and advance money to such borrower. In a cession in security, the cedent transfers its right of action to a debt owed to it, known as the principal debt, to the cessionary as security for the debt owed by the cedent to the cessionary, known as the secured debt. An outandout cession, where title to the property is transferred to the cessionary, subject to the cedants right to have the property transferred back to it by the cessionary once the debt, or other obligation secured, is discharged. The only time a pledge construction will be upheld is when the.
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