Summary
BER 220 Insolvency Summary
- Course
- Institution
- Book
Business Law 220 (BER 220) summary of insolvency law (chapter 34, 35 and 36)
[Show more]
Connected book
Book Title:
Author(s):
- Edition:
- ISBN:
- Edition:
More summaries for
-
BER 220 CHAPTER 30
-
BER 220 Labour Law Summary
-
BER 220 Summary for Shareholder, Winding-up and Close Corporations
1 review
By: noelpillay16 • 1 week ago
Seller
Follow
dupreezmich
Reviews received
Content preview
INSOLVENCY LAW• totality of rules regulating the situation where debtor cannot pay debts, or where total liabilities
exceed total assets
• creditors can then jointly apply for sequestration for debtor’s estate
Introduction
• debtor is unable to pay his/her debt (debtors options):
o (section 74 of the Magistrates’ Courts Act 32 of 1994), provided that debts ≠exceed R50000:
▪ can apply for an administration order (debtor make payments to administrator)
▪ list of creditors will be drawn by administrator, and they will be repaid with amounts
received from debtor
o debtor is insolvent, can voluntarily surrender estate if necessary requirements are met
o may enter into release/ novation with creditors
▪ means he commits act of insolvency ∴ creditors may apply for sequestration of debtor
o debt for credit agreement i.t.o. National Credit Act 34 of 2005
▪ debtor obtain assistance form debt counsellor to re-arrange his debts
• Creditors options:
o Individually claim performance – demand payment from debtor, not respond = creditor issue
summons/obtain civil judgement, may attach property and sell (proceeds satisfy debt)
o Collective collection -Jointly apply for sequestration of estate (if assets x sufficient to satisfy all
claims against estate)
▪ Purpose = pay dividend to concurrent creditors, instead of satisfying only few creditors
▪ provide for orderly distribution of debtor’s assets where assets are insufficient to satisfy
all creditors’ claims
Insolvency
• Insolvency Act 24 of 1936 – based on 2 principals
o right which creditors have to satisfy their claims through the process of execution
o concurrency of creditors who do not have a preferent or secured claim
• Debtor loses control of estate when sequestration order is given by High Court:
o Control of estate vest in Master of High Court, then in trustee
o Trustee sells assets and pay creditors in manner provided by act
o Concursus creditorum – interest of creditors as group ranks priority over interests over individual
creditors
▪ Creditors≠ attach assest obtain by insolvent after sequestration
▪ Debtor ≠ alienate/burden property (contractual capacity = limited until rehabilitation)
Estates that can be Sequestrated
,• Act defines debtor = person/partnership/deceased estate/estate of person incapable for handling
own affairs/trust
• Companies Act 61 of 1973 – regulates liquidation of insolvent estates
• Companies Act 71 of 2008 – regulates liquidation of solvent companies
Jurisdiction
• Only High Court = make sequestration and rehabilitation orders
• Specific local/provincial division has jurisdiction to sequestrate debtor if he on date of application:
o is domiciled within area of jurisdiction of court
o own or is entitled to property situated within area of the court’s jurisdiction
o at any time during 12 months immediately preceding date of application, resided or carried out
business within area of court’s jurisdiction
• application for the rehabilitation must, in principle be brought in the same division where the debtor
was sequestrated
Voluntary Surrender
The Applicant
• Who can apply:
o Debtor, Agent or representative with special authority, Curator bonis (person appointed to
handle the estate of a person incapable of handling his own estate), Executor of a deceased
estate If the debtor is married: (In community of property –both spouses must apply jointly; Out
community of property- only the debtor will apply), Ordinary Partners: Apply jointly for
surrender of partnership at the same time –apply for surrendering of own estate
Preliminary formalities
• Step 1 – Debtor must publish a notice of intention to surrender his estate in the GG + newspaper
where debtor is staying/trading/principal business is located: 14-30 days before application
o Notice must correspond with Form A of First Schedule of Act + signed by debtor/his attorney
o Notice may be revoked with Master’s consent by publishing notice to that effect in GG & local
newspaper
o Notice may expire if courts reject application/debtor x continue with voluntary surrender
o Effects of the notice:
▪ Assets cannot be attached
▪ Sheriff may not pay creditors after sales
▪ Money and assets must be transferred to trustee
▪ Exceptional circumstances: -Master can authorise sale in execution
▪ Temporary curator bonisto control estate
• Step 2 – Notice of surrender to must be sent to all known addresses of creditors SARS, Employees +
trade unions: within 7 days of publication of the notice
• Step 3 – Prepare statement of affairs to lie for inspection by creditors at the Master's office:
, o List all assets and liabilities
o 2 Copies to the masters office where the debtor resides (No local master –sent to provincial
Master and one copy to Master of the district)
o Must be open for 14 days for inspection from date of surrender
• Purpose of preliminary formalities:
o To inform creditors of the application
o Enable them to object to such an application
The application
• Application is brought by way of notice of motion supported by affidavit (court decision = based on
merit according to strength of documentary evidence
• Applicant and creditors state facts in affidavits (lodged 2 days before date of application)
• Creditors may object to incorrect statement of affairs = Master/magistrate must certify that
objections were lodged against statement + notify court. Applicant may address court regarding
application
Applicants burden of proof
• Applicant must prove the following:
o Formalities were complied with (documentary proof)
o Applicant is in fact insolvent
o Sufficient residue to cover sequestration costs (Master’s fees, cost of application, trustee’s
compensation etc.)
o Sequestration to advantage of creditors
• Court has a discretion to grant or refuse the sequestration order - Can postpone or refuse if brought
with an improper motive
Compulsory Sequestration
• Creditor apply for sequestration of the debtor
• Court will initially place estate under provisional sequestration
Formalities
• Applicant must give security to Master for sequestration costs until trustee is appointed
o Must get a certificate to proof
o Not more than 10 days before application (certificate must be filed with application)
o Copies of the application must be sent to Debtor, SARS, Employees + trade unions (if applicable)
The application
• Applicant must include affidavit stating that he is creditor of insolvent, amount and nature of his claim
and the basis for, amount and nature of security (if any).
• Must state that debtor is insolvent (and give reasons) / debtor has committed act of insolvency
The benefits of buying summaries with Stuvia:
Guaranteed quality through customer reviews
Stuvia customers have reviewed more than 700,000 summaries. This how you know that you are buying the best documents.
Quick and easy check-out
You can quickly pay through credit card or Stuvia-credit for the summaries. There is no membership needed.
Focus on what matters
Your fellow students write the study notes themselves, which is why the documents are always reliable and up-to-date. This ensures you quickly get to the core!
Frequently asked questions
What do I get when I buy this document?
You get a PDF, available immediately after your purchase. The purchased document is accessible anytime, anywhere and indefinitely through your profile.
Satisfaction guarantee: how does it work?
Our satisfaction guarantee ensures that you always find a study document that suits you well. You fill out a form, and our customer service team takes care of the rest.
Who am I buying these notes from?
Stuvia is a marketplace, so you are not buying this document from us, but from seller dupreezmich. Stuvia facilitates payment to the seller.
Will I be stuck with a subscription?
No, you only buy these notes for $4.00. You're not tied to anything after your purchase.
Can Stuvia be trusted?
4.6 stars on Google & Trustpilot (+1000 reviews)
75759 documents were sold in the last 30 days
Founded in 2010, the go-to place to buy study notes for 14 years now