THE LAW OF INSOLVENCY

 DEFINITION OF INSOLVENCY LAW

 The totality of rules regulating the

situation where a debtor cannot pay
his/her debts or where his/her total
liabilities exceed his assets.
 The law of insolvency is regulated
by the Insolvency Act 24 of 1936.
 The Act provides for processes
available to a debtor who is unable
to pay his/her debts.
 PURPOSE OF THE
INSOLVENCY ACT
 To ensure that sequestration is to
the advantage of creditors.
 To release the debtor from future
liability for the debts by
rehabilitation.
 To protect creditors against
possible greed and untruthfulness
of other creditors
.
 • VOLUNTARY SURRENDER
• Sequestration at own request.
• Debtor applies to court to have his estate
sequestrated.
• Court has a discretion whether or not to
HOW IS THE grant the application.
• Reasons for voluntary surrender
ESTATE OF • To halt legal proceedings and end
THE DEBTOR harassment by creditors.

SEQUESTRAT • To stop paying creditors.

• To solve a debt problem.
ED? • To have an impartial person liquidate
assets and distribute the proceeds.
• To avoid unjustifiable amounts for bad
business decisions.
• To give the insolvent person a clean
break.
 Procedure for voluntary surrender

•The applicant must satisfy the court that:

• Creditors were notified.
• Applicant’s estate is insolvent (i.e., liabilities exceed the assets).
• Sequestration is to the advantage of the creditors.
• There are sufficient assets to cover the costs of sequestration.
• Cases: Ex parte Goldman 1930 WLD 158; Ex parte Concato and
similar cases 2016 (3) SA 549 (WCC); [2016] 2 All SA 519 (WCC).
 • Occurs where a creditor who has an
unsatisfied and liquidated claim applies
to court for sequestration of the debtor’s
assets.
• A liquidated claim means the exact
monetary value of the debt is certain or
easily ascertainable.
2. COMPULSORY • An applicant needs to satisfy the court
SEQUESTRATION that:
• He/she has a liquidated claim of R100
or more.
• The debtor is insolvent or has
committed an act of insolvency.
• Sequestration is to the advantage of
creditors.
 • Form of sequestration brought about by
cooperation between a debtor and a
creditor.
• The applicant has to prove in court:
3. FRIENDLY • That there is a valid claim against the
debtor.
SEQUESTRATON • That an act of insolvency has been
committed by the debtor.
• That there is an advantage to creditors
if the debtor’s estate is sequestrated.
 ACTS OF INSOLVENCY
• The debtor absents himself from dwelling or from SA;
• The debtor has failed to satisfy a court judgement against him;
• The debtor attempts to remove property to prejudice creditors or to give
preference to one creditor over another;
• The debtor offers to make arrangement with creditor that releases the debtor
wholly or partly from his debts;
• The debtor fails to lodge necessary documents after notice of surrender has
been lodged;
• The debtor gives notice of sale of his business and thereafter fails to pay his
debts.
• The debtor gives written notice to creditors that he/she is unable to pay his
debts.
•Cases: Du Plessis en ‘n ander v Tzerefos 1979 (4) SA 819 (o).
THE END