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LILL 4824 - Test 1 July Questions and answers
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This is a comprehensive and detailed test 1 doc done in July 2019. Quality stuff!! For effective study!!
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LILL4824 Main test Memo (2019)Set of Facts – The set of facts applies to the whole paper.
Thabo bought a house in February 2018. He and his girlfriend Wendy moved in together and
are happily living together. Their combined income allows them to pay their monthly expenses,
but due to a continuing economic recession and increased living costs, they have not been able
to save up any money. The current outstanding bond on the house with FNB is R 500 000-00
(five hundred thousand rand). To celebrate their six month anniversary living together, Thabo
buys Wendy an engagement ring on credit from Sparkle&Shine to the value of R40 000-00
(forty thousand rand). He pays monthly instalments directly to the store and the outstanding
amount on the ring is R30 000 (thirty thousand rand). Shortly after this his car breaks down and
he borrows R10 000-00 (ten thousand rand) from his friend Raj to cover the costs for his car. He
agrees to make monthly instalments to Raj to settle this debt, but have not yet made any
payments. During the annual personal tax season Thabo receives a tax assessment (invoice)
from SARS in the amount of R60 000-00 (sixty thousand rand). In April 2019 Thabo’s hardware
store, Cable&Tie (Pty) Ltd is also under financial distress. He is both the shareholder and
director of the company and he borrows R600 000 (six hundred thousand rand) from his parents
to invest in his company in order to prevent his business going insolvent; the full amount of
which is still outstanding to his parents.
Question 1
1.1 Based on the facts presented, explain to Thabo if he is financially or legally insolvent.
(4)
Students have to explain these points, not only bullet it down:
Financially insolvent (1)
Apply legal test (1): Assets fairly valued less than liabilities fairly estimated (1)
Legally insolvent requires sequestration order to be issued (1)
Par 1.1
1.2 Explain how the formation of the concursus creditorum limits the rights of a creditor.
(1)
Par 1.2
Question 2
Due to Thabo’s business being under financial strain, he falls behind on the mortgage payments
and receive a final notice from the bank to pay all outstanding instalments. He realises that the
bank will continue with an application for a sequestration order against him. He feels too
embarrassed to have the bank make this application and considers friendly sequestration by
asking Raj to rather bring the application for his sequestration.
Identify the requirements associated with friendly sequestration and discuss each requirement
as it applies to this set of facts. Your answer should first identify the relevant requirements and
then discuss how each requirement will apply to the set of facts presented. Where necessary,
1
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