Exam (elaborations)
MRL3701 Assignment 2 (ANSWERS) Semester 1 2024
- Course
- Insolvency Law
- Institution
- University Of South Africa
MRL3701 Assignment 2 (ANSWERS) Semester 1 2024
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QUESTIONS AND ANSWERS[DATE]
[COMPANY NAME]
[Company address]
, Wandile owes a total of R3 million to various creditors. His creditors include
Zozo to whom he owes R400 000. He also owes R1,3 million to DRG Bank.
Last year Wandile invested in a get-rich-quick scheme as a result of which he
lost a lot of money. This left him in a dire financial situation. By 31 October
2023 his liabilities exceeded his assets by R800 000. Over the past few
months Wandile has failed to pay some of his debts. In particular he failed to
pay the R400 000 he owes to Zozo. This debt was due and payable on 1
February 2024. Disappointed at not having been paid back the R400 000
owed to her, Zozo undertook an investigation into Wandile’s financial
situation. The investigation turned up unassailable proof that Simphiwe had
owed R100 000 to his father-in-law, and that Simphiwe repaid R80 000 to his
father-in-law on 3 February 2024. Mindful that he was technically insolvent
and that one of his creditors could apply for the sequestration of his estate at
any time, Simphiwe had wanted to ensure that whatever happened, his father-
in-law would at least get something from his estate. Hence, he repaid the loan
that he had obtained from his father-in-law even though the amount was only
due and payable on 30 November 2024. Zozo has established that Wandile
owns a house in Mamelodi valued at R700 000, household furniture valued at
R300 000 and a motor vehicle valued at R800 000. Zozo is planning to apply
for the sequestration of Wandile’s estate. Answer the following questions
based on the facts given above:
a. Discuss the requirements that an applicant must prove in order to obtain
a court order for the sequestration of a debtor’s estate. (3)
1. Insolvency:
The applicant must establish that the debtor is insolvent, meaning that
the debtor is unable to pay their debts as they become due. In this case,
Wandile's liabilities exceeded his assets by R800,000, indicating
insolvency.
2. Cessation of Payment:
The applicant needs to show that the debtor has ceased to meet their
financial obligations. In Wandile's case, his failure to pay the R400,000
debt to Zozo and other debts, despite being due, suggests a cessation
of payment.
3. Benefit to Creditors:
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