Notes for Semester Test and Exam

• Insolvency law


  Procedures to deal with insolvency of natural persons (individuals/consumers)
• Debt relief procedures available to the debtor

  • Apply for administration order in terms of s 74 of Magistrates Courts Act 32 of 1944
  • Consumer overindebted, apply for debt review for the debt that constitutes credit agreements as regulated by Section 86 NCA
  • Debtor may enter into voluntary agreement with creditors regarding a release/novation (payment plan) for existing debt
  • Sequestration
  • Composition (Statutory/common law)
  • Law reform initiatives – Proposed legislation – Statutory composition before sequestration (Coetzee and Roestoff 2020 Int Ins Rev)
  • New remedy – "Debt intervention" – National Credit Amendment Act
• Appropriate remedy for "no income no asset" (NINA) debtors?
• Procedures that NINA debtors are excluded from


  • Sequestration
  • Debt review
  • Administration
• Individual debt collecting


  • Letter of demand
  • Summons (civil judgement)
  • Execution
  • Garnishee orders (section 72 MCA)
  • Emoluments attached orders (section 65J MCA)
  • Debtors court procedure (section 65A)
• When a debtor fails to satisfy his obligations/liabilities to creditors, each creditor can claim performance
• Should the creditor demand payment and the debtor does not respond, summons is issued, and a civil judgement is obtained against debtor
• Creditor may thereafter attach property if the debtor fails to pay judgment debt
• Attached property may then be sold in execution at a judicial sale of which creditor is entitled to proceeds of the sale
• Should the debtor's assets not be sufficient to satisfy all claims, creditors can individually or jointly apply for the sequestration of the debtor's estate by means of compulsory sequestration
• Insolvency law


  The totality of rules regulating the situation where a debtor cannot pay his debts/ total liabilities exceed his assets
• Balance sheet test used to determine insolvency
• Factual insolvency


  Debtor cannot pay debts due to cash flow or other problem, but assets still exceed liabilities
• Commercial insolvency


  Debtor commits an act of insolvency which leads to compulsory sequestration
• Insolvent estate


  An estate under sequestration
• Insolvency law


  • Based on two basic principles: The right which creditors have to satisfy their claims through process of execution against assets of debtor and the concurrency of creditors who do not have a preferent/second claim, but the procedure will only be put into motion if the benefit to the creditors can be proved
• Debtor loses control over estate as soon as an order for sequestration is granted by High Court
• Concursus creditorum


  General interest of the group (creditors as a group) is prioritised over the interest of the individual creditor
• One creditor cannot through the sequestration process receive full payment at the cost of the other creditors, or improve his position in relation to the estate
• Creditors cannot attach any other assets obtained by the insolvent after sequestration
• The debtor's contractual capacity is limited until the date of his rehabilitation in SA
• The Insolvency Act provides for setting aside of impeachable transactions, made before the date of sequestration to the detriment of the creditors
• The Insolvency Act provides for criminal liability when criminal offences are committed
• Ordinance of Amsterdam is a basis of Insolvency law in SA


  1777
• Other sources of insolvency law

  • (former) Companies Act 71 of 2008
  • Close Corporations Act 69 of 1984
  • Banks Act 94 of 19990
• The Minister of Justice may enact regulations that are not contrary to the 2008 Act
• The Master is bound by section 32 ad 33 (right to information and fair administration action) of the Constitution when exercising administrative acts
• Section 151 of the Act provides for a special statutory review whereby the master's administrative rulings, decisions or orders can be taken on review by the HC
• Estates that can be Sequestrated

  • Debtor in the usual meaning of the word (except company)
  • Association of persons or other juristic person which may be wound-up
  • Deceased estate
  • Estate of a person incapable of handling his own affairs
• The body corporate of the sectional title scheme cannot be sequestrated since it is not included in the definition and cannot be wound-up either
• Where spouses are married in community of property, the joint estate gets sequestrated, both spouses must join as applicants/respondents respectively
• It is possible for an unrehabilitated insolvent to acquire an estate that will be protected against his trustee
• Jurisdiction of High Court for sequestration and rehabilitation orders


  • Debtor is domiciled within the area of jurisdiction of the court
  • Debtor owns or is entitled to property located within the area of the court's jurisdiction
  • Debtor at any time during the 12 months immediately preceding the date of application, ordinarily resided or carried business within the area of the court's jurisdiction
• Certain HC divisions could have concurrent jurisdiction with regards to the same estate
• The Magistrates court has jurisdiction over issues which normally fall in their jurisdiction for example criminal matters, and the impeachment of voidable transactions
• Any division of the HC may review decisions of the Master (except the appointing of a trustee) or by the chairperson of the meetings of creditors (section 151)
• Distribution of the proceeds of insolvent estate's assets

  • Secured creditors (eg bondholders)
  • Statutory preferent creditors (eg SARS)
  • Concurrent creditors
• Sequestration process


  • Application proceedings (notice of motion)
  • Voluntary surrender
  • Compulsory sequestration
  • Actual insolvency / Acts of insolvency
  • Advantage to creditors
  • Formalities iro voluntary surrender
• Effects of sequestration


  • Insolvent estate (section 20; exempt assets)
  • Estate of solvent spouse (section 21)
  • On insolvent personally
• Uncompleted contracts


  • Who is sequestrated/liquidated?
  • Type of contract? o Sale (immovable/movable assets – cash, credit or instalment agreement?) o Lease o Contract of employment