Section 1 Questions
1. What is the definition of a “debtor” in terms of the Insolvency Act 24 of 1936? (4)
A debtor means a person or a partnership or the estate of a person or a partnership which is a debtor in the usual sense of the word, except a
body corporate or a company or other assoc...
section 1 questions 1 what is the definition of a “debtor” in terms of the insolvency act 24 of 1936 4 a debtor means a person or a partnership or the estate of a person or a partnership which is
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MRL2601 Questions and Answers Semester 1 & 2 2021
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Section 1 Questions
1. What is the definition of a “debtor” in terms of the Insolvency Act 24 of 1936? (4)
A debtor means a person or a partnership or the estate of a person or a partnership which is a debtor in the usual sense of the word, except a
body corporate or a company or other association of persons which may be placed in liquidation under the law relating to companies.
2. What is the purpose of a notice of surrender? (2)
The purpose of the notice of surrender is to alert creditors as to the intended application in case they wish to oppose the application.
3. State the requirements which must be proved before the Court will grant a voluntary sequestration order. (4)
1. The preliminary formalities have been observed.
2. The debtor’s estate is in fact insolvent.
3. The debtor owns realizable property of sufficient value to defray all costs of the sequestration.
4. Sequestration will be to the advantage of creditors.
4. What is the meaning of the term “spouse” for the purposes of the term “solvent spouse” under section 21 of the Insolvency Act? (3)
For the purpose of section 21, “spouse” has an extended meaning and includes a wife or a husband married according to any law or custom,
and also a person living with a member of the opposite sex, although not married to her or him (s 21(13)).
According to Chaplin NO v Gregory, on the insolvency of a married man or woman who is living with a third person (i.e., not the legal spouse),
the property of only the legal spouse, and not that of both the spouse and the third person, vests in the trustee.
5. State the two maximum limits (in time and in money) to the employee’s preferent claim for arrear salary or wages in terms of section
98A of the Insolvency Act. (2)
Salary or wages due to an employee, for a period not exceeding three months and to a maximum of R12 000.
6. State three grounds on which the Master may remove a trustee from office. (3)
Any three of the following:
1. he was not qualified for appointment or that his election or appointment was illegal or he has become disqualified ;
2. he has failed to perform any of his duties satisfactorily or comply with a lawful demand of the Master;
3. he is mentally or physically incapable of performing satisfactorily his duties as trustee;
4. the majority of creditors have requested in writing that he be removed;
5. he is no longer suitable in the opinion of the Master, to be the trustee of the estate concerned.
7. Name three circumstances in which the Master may refuse to confirm the appointment of a person nominated as a trustee. (3)
Any three of the following:
1. he was not properly elected;
2. he is disqualified from being a trustee;
3. he has failed to give the required security;
4. if in the opinion of the Master, he should not be appointed as trustee to the estate in question.
8. When will a disposition made in compliance with a court order qualify as a disposition under section 2 of the Insolvency Act? (3)
The disposition will qualify as a disposition under section 2 if the creditor obtained the court order by fraud or collusion with the insolvent and
with the intention of prejudicing other creditors (Sackstein & Venter NNO v Greyling).
The onus of proving fraud or collusion lies on the party seeking to set aside the disposition (Dabelstein & Others v Lane & Fey NNO).
9. Section 85(2)(a) of the Insolvency Act provides that the claim of the landlord of a building against the insolvent estate of the tenant is
secured up to an amount of three months’ rent if the rent is payable monthly or at shorter intervals. Section 85(2)(b)-(d) provides for
three other such periods of rent for which the landlord’s claim is secured. State these other periods. (3)
The claim is secured up to an amount of:
1. six months’ rent, if the rent is payable at intervals exceeding one month but not more than three months;
2. nine months’ rent, if the rent is payable at intervals exceeding three months but not more than six months;
3. 15 months’ rent, if the rent is payable at intervals exceeding six months.
10. Maredi and Botha are partners in a medical business. You are an attorney, and they instruct you to apply to court for the voluntary
surrender of the partnership estate. Only Botha has signed the application. Explain whether the application will succeed. (3)
The application will not succeed. As a rule, an application to surrender a partnership estate must be brought by all the partners, or their
agents. The exceptions are partners residing outside South Africa, partners en commandite (anonymous partners), and special partners. In Ex
parte Bester, the court refused an application for surrender of a partnership estate because only one partner had signed the application.
In applying the law to the facts, Maredi must also sign the application in order to succeed.
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, 11. A provisional order for the winding up of Bafana (Pty) Ltd has been granted by the High Court. A provisional liquidator has to be
appointed at the same time. Name two of the most important obligations of a provisional liquidator. (2)
1. The provisional liquidator must give security to the satisfaction of the Master for the proper performance of his duties.
2. He is required to hold office until the appointment of a liquidator.
12. Name two grounds on which a close corporation may be wound up by the court. (2)
Any two of the following:
1. resolution of the members;
2. failure to commence business or continue with business;
3. inability to pay debts;
4. just and equitable.
13. Complete the following sentence: The award of a sequestration order creates a ..............................................................., and creditors
who have proved a claim have the right to share with other proved creditors in the proceeds of the estate assets. (1)
Concursus creditorum
14. What is the meaning of “property”, as defined in section 2 of the Insolvency Act 24 of 1936? (5)
“Property” means movable or immovable property wherever situated in the Republic and includes contingent interests in property but
excludes the contingent interests of a fidei commissary heir or legatee.
15. Under what circumstances may a court having jurisdiction over a debtor refuse (or postpone) the surrender or sequestration of the
debtor’s estate? (3)
If it appears equitable or convenient that the estate should be sequestrated in another court within the Republic; or
the debtor is domiciled in a state which has not been designated in terms of the Cross- Border Insolvency Act 42 of 2000 and it appears to the
court equitable or convenient that the estate should be sequestrated by a court outside the Republic.
16. What is the meaning of “special mortgage”, as defined in section 2 of the Insolvency Act 24 of 1936? (5)
“Special mortgage” means a mortgage bond hypothecating any immovable property or a notarial mortgage bond hypothecating specially
described movable property in terms of section 1 of the Security by Means of Movable Property Act, 57 of 1993, or such a notarial mortgage
bond registered before 7 May 1993 in terms of section 1 of the Notarial Bonds (Natal) Act, but excludes any other mortgage bond
hypothecating movable property
17. Explain the difference between a void contract and a voidable contract. (2)
A void contract simply has no legal force, but a voidable contract has legal force until it is set aside.
18. Discuss Epstein v Epstein 1987 (4) SA 606 (C) in respect of “friendly” sequestrations. (6)
This is an example of a “friendly” sequestration.
The applicant was the respondent's mother. He committed an act of insolvency by notifying her in a letter that he was unable to repay her a
loan of R6000.
The court pointed out that the purpose of the Insolvency Act is to effect a just and orderly distribution of a debtor’s estate to his creditors.
Therefore it is important that the requirement of advantage to creditors must be proved before a sequestration order may be granted. This
requirement is even more important in a “friendly” sequestration where a creditor applies for the sequestration of a debtor’s estate with the
sole aim of providing relief for the debtor. This aspect was emphasised by the court’s view that friendly sequestrations should not be
automatically refused, but they should be carefully scrutinised.
Therefore particular emphasis is placed on the requirement of advantage to creditors.
19. Name three persons who are relatively disqualified from being a trustee in respect of a particular estate. (3)
The following persons are disqualified in respect of a particular estate:
1. a person related to the insolvent in blood or by marriage within the third degree;
2. a person having an interest opposed to the general interest of the creditors;
3. a person who acted as the bookkeeper, accountant, or auditor, of the insolvent at any time during a period of 12 months immediately
preceding the date of sequestration; or
4. An agent authorized to vote on behalf of a creditor at a meeting and who acts or purports to act in terms of that authority (s 55).
20. The trustee may terminate employment contracts between the insolvent employer and the employees after consultation with certain
parties. Name these parties. (5)
1. collective agreement
2. workplace forum
2
, 3. registered trade union
4. employees registered trade union
5. employee personally
6. employee’s nominated representative
21. State the requirements of section 72(7) of the Close Corporations Act 69 of 1984 that must be met before a composition will be binding
on persons who had notice and were entitled to vote at the relevant meeting of creditors of the close corporation. (5)
1. the composition was accepted by two-thirds (in number and in value) of the creditors who proved claims against the corporation;
2. payment under the composition is made or secured as specified in the offer;
3. the rights of secured or preferent creditors are not prejudiced (unless waived in writing)
22. What is the meaning of “immovable property” as defined in section 2 of the Insolvency Act 24 of 1936?
“Immovable property” means land and every right or interest in land or minerals which is registrable in any office in the Republic intended for
the registration of title to land or the right to mine.
23. What is the definition of “disposition” in terms of section 2 of the Insolvency Act 24 of 1936? (4)
“Disposition” means any transfer or abandonment of rights to property and includes a sale, lease, mortgage, pledge, delivery, payment,
release, compromise, donation or any contract therefore, but does not include a disposition in compliance with an order of the court.
24. Name any four of the various estates that fall within the meaning of the word “estate”. (4)
Any four of the following:
1. An estate that includes all assets and liabilities.
2. An estate that consists of liabilities only.
3. The joint estate of spouses married in community of property.
4. The separate estates of spouses married out of community of property.
5. The new estate of a debtor whose estate has been sequestrated.
25. State the requirements which must be proved before the Court will grant a voluntary sequestration order. (4)
1. The preliminary formalities have been observed.
2. The debtor’s estate is in fact insolvent.
3. The debtor owns realizable property of sufficient value to defray all costs of the sequestration.
4. Sequestration will be to the advantage of creditors.
26. Name briefly and without discussion any two acts of insolvency. (2)
Any two of the following:
1. Absence from the Republic or dwelling.
2. Failure to satisfy a judgment.
3. Disposition prejudicing creditors or preferring one creditor.
4. Removal of property with intent to prejudice or prefer.
5. Offer of arrangement.
6. Failure to apply for surrender.
7. Notice of inability to pay.
8. Inability to pay debts after notice of transfer of business.
27. Explain the concept "liquidated claim" and state three examples of such a claim. (6)
A liquidated claim is a claim for money, the amount of which is fixed by agreement, judgment, or otherwise.
The examples of such a claim given by Hockly include the following:
1. a claim for the price of goods sold and delivered;
2. a claim based on judgment for provisional sentence; and
3. a claim for the return of the price paid under a sale which has been cancelled because of the seller's repudiation.
28. Discuss Vorster v Steyn en andere 1981 (2) SA 831 (O) in respect of assets inherited by the insolvent whilst his estate is under
sequestration. Do not discuss the issue of a declaratory order. (6)
Facts: A testator attempted to place the property bequeathed to his heir out of reach of the heir’s creditors by providing that a trust should
hold the inheritance if the heir is insolvent, until his rehabilitation; The case thus deals with the vesting of property inherited by the insolvent
while his estate is under sequestration and he is not yet rehabilitated.
The court decided that a clause of this nature is void and that the assets vested in the trustee. A testator could validly state that the insolvent
heir is substituted with another heir, for example, by stating that if his heir is an unrehabilitated insolvent at the time of his death then the
assets would go to his brother. Another possibility is the creation of a discretionary trust which gives the trustee the exclusive discretion to name
a substitute heir if the intended heir is insolvent at the death of the testator.
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