ISR 310

• Insolvency


  About sharing assets to as many creditors as possible
• Sequestration


  The legal process of declaring an individual insolvent
• Discharge


  The only process in South Africa to end sequestration is discharge the debt only after 10 years from when the sequestration order was granted or via court order, when you ask the court to discharge you earlier
• If you are sequestrated, you can reject your inheritance
• Insolvency


  Separated into "debtor-friendly" or "creditor-friendly" or "balanced", South Africa is usually considered to be creditor-friendly
• Types of Insolvency


  • Balance-Sheet/ Factual/ Actual (natural persons - sequestration)
  • Commercial/ Cash-flow/ Inability to pay debts as they fall due (Corporations - Liquidation/winding-up)
• Execution


  Selling the asset to generate money to pay creditors
• Consequences of sequestration - it affects all creditors as well as debtors because they have limited contractual capacity
• Options for Creditors


  • Individual (one on one payment, dispute)
  • Collective (one process to rule them all - sequestration)
• Encumbered Asset/Burdened Assets


  Assets that are burdened, that will go directly to those who money is owed to
• Encumbered assets can be secured by multiple creditors
• A trust is not a separate legal entity, the trustee is not personally liable for the trust which they are a trustee, they have their own estate
• A deceased estate cannot be rehabilitated, as you rehabilitate the person not the estate. Therefore, a dead person cannot be rehabilitated
• Section 2 and 13 deviates from Common law in terms of the Insolvency Act
• Section 128 of Insolvency Act - partnership cannot be rehabilitated
• If only one partner in a partnership is sequestrated, it will not have an effect on the partnership estate however the partnership will no longer exist it comes to an end
• Partnership can be a between natural persons or companies
• How to approach the module

  1. Read prescribed section of the text book

  2. Plus case law

  3. Class notes

  4. Incorporate the three together in order to fully understand the work
• Jurisdiction


  Only a high court can hear sequestration proceedings, magistrates cannot hear this cases
• When more than one court has jurisdiction, they have concurrent jurisdiction therefore it becomes a matter of convenience, which court can more easily hear the case
• Considerations for jurisdiction


  • Where the debtor is domiciled
  • Where the debtor owns or is entitled to property
  • At any time during 12 months preceding application
• Convenience is not grounds for jurisdiction alone, only comes into to play when there is more than one court at play
• Considerations for convenience


  • Where is the debtor most of the time?
  • Where are most of the debtors assets
  • Where are the debtors creditors
• Master of the High Court

  Deals with the administration, decisions can be reviewed in terms of administration law
• Locus Standi


  Can be given an affidavit and fix corrections or write a paragraph or identify the debtor
• Affidavit


  Written under oath and in the first person, company affidavit cannot be written in the first person
• Must always tell the court how or if the debtor is married. If can't you must tell the court
• If married in COP s17(4) of the Matrimonial Property Act must be able to explain how marriage whether COP or nor affects sequestration
• Must be able to do citation. "I am a major male ID number, living in..."
• Must be able to identify jurisdiction and theoretically explain/understand convenience
• Preliminary formalities before applying for Compulsory Sequestration

  • Liquidate claim
  • Debtor actually insolvent or committed an act of insolvency
  • Reason to believe that sequestration will advantage creditors
• Acts of Insolvency S8 (a-h)

  • Section 8 (a-h)
  • C & D - the disposition of property v the removal of property. (c) is accidental while (d) is done on purpose
• Must be able to identify acts of insolvency in a set of facts
• Sequestration order


  The creditor approaches the court twice - provisional order of sequestration, then the provisional order is confirmed and made final
• Friendly Sequestration


  When someone you know applies for sequestration of your estate, sometimes done with other motives