Summary
Summary Law of insolvency: Ranking of creditors and any types of claims
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Comprehensive notes summarized from the Hockley's Insolvency Law 9th edition textbook.
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Topic 7: Ranking of creditors and any types of claimsIntroduction
- Insolvent estate must be distributed among creditors according to their preference
Three types of creditors
- Concurrent creditors
- Preferent creditors
- Secured creditors
1. Concurrent creditors
- Refers to creditors who enjoy neither
o Preference
o Nor do they hold any secured claim against insolvent estate
o Hold no advantage over other creditors of insolvent
- Such creditors are only entitled to be paid from
o Free residue (that part of estate which remains after the preferent creditors have been
paid)
S103(1)(a) provides
- If not enough money left in free residue to pay all their claims in full (which is often the case)
o Concurrent creditors paid proportionally by way of a dividend
How are they ranked?
o All concurrent creditors are ranked equally amongst themselves
This means
o Dividend would apply equally to all concurrent claims
Example: 1
- If free residue amounts to R5000
o A has concurrent claim of R6000
o B has concurrent claim for R4000
Result is that
o Both A and B will receive a dividend of 50cents in the rand (one half of their respective
claims)
A will receive R3000
B will receive R2000
1
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