The Malaysian Government, through Bank Negara Malaysia, that commercial banks will give automatic moratorium to certain types of loans. This provided a small relief to most Malaysians and business owners. However, there is a growing misunderstanding that this moratorium applies to ALL debts, including business debts. Whilst you may be lucky if you are given a moratorium on your business debts, a debt is a debt. Debts with your suppliers, vendors, landlords, agents etc are still debts that may be due and owing. As most business struggle to stay afloat, there will be a lot more debt recovery legal action taken during these trying times. However, my experience in dealing with Debt Recovery and Dispute Avoidance, legal action can be avoided if you manage it well.
Here are some of my tips on how you can avoid being sued in Court for your business debts during RMO.
1. Always Communicate
The No.1 reason why debt recovery is taken to Court is poor communication. Far too many avoid picking up calls, ignoring letters and emails etc. Learn to communicate and communicate honestly. Most businesses are facing the same problems and are generally able to understand what you are going through. Just explain the challenges you are facing (briefly) and what are your plans moving forward. An honest communication usually will do the trick.
2. Supporting Documents
Be sure to have all your supporting documents accessible to you. This includes your contracts, purchase orders, invoices etc. This is to make discussions and negotiations better. Understand what the agreement says – what are your liabilities, if you can rely on Force Majeure or Frustration, can you terminate the agreement, what are the payment terms etc. Never discuss and deal without reference to your supporting documents. The agreement maybe in your favor – and no debt with the creditor. Be sure to consult with a Commercial Lawyer if you are not sure.
Another reason to have all your supporting documents ready is to be ready in case you are still sued / sue in Court. You need all your documents ready to support your case in claiming / opposing a claim. Courts decide on who has the better evidence.
3. What Options Do I Have?
Now that you have communicated with your creditor, what options is available? Well, here are some (and not exhaustive) options you have:-
A. Write Off the Debt
This involves the creditor agreeing that you do not have to pay back the debts.
B. Payment at a Discount
This involves the creditor giving you a discount on the debts. Creditors usually require payment to be immediate as a discount has already been given.
C. Monthly Installments
This involves the creditor allowing you to make installment payments of your debts. Usually, payment by monthly installments will be the full amount of the debts; just paid over a period of time.
3. Put it Down in Writing
Last but definitely not least, always put down what you had agreed in writing. This is especially important if there is an existing agreement – what you had agreed amounts to a variation of the agreement. I have had to defend a client who had his supplier “change his mind” after agreeing on a discounted payment. Although we won the case at the end, it was a waste of time, resources and money to had to go through the court process.
Be sure you manage your business debts because it won’t just disappear.
Talk to your Commercial Lawyer should you need to know more.