MRL3701
Assignment 1 Semester 1 2026
Detailed Solutions, References & Explanations
Unique number:
Due Date: 2 March 2026
QUESTION 1
Voidable Preference
A voidable preference occurs when a debtor, shortly before becoming insolvent, makes a
payment or transfer to one creditor in a manner that places that creditor in a better position
than the others. This is prohibited because insolvency law is based on the principle that
creditors must be treated equally once sequestration takes place.
Terms of use
By making use of this document you agree to:
Use this document as a guide for learning, comparison and reference purpose,
Not to duplicate, reproduce and/or misrepresent the contents of this document as your own work,
Fully accept the consequences should you plagiarise or misuse this document.
Disclaimer
Extreme care has been used to create this document, however the contents are provided “as is” without
any representations or warranties, express or implied. The author assumes no liability as a result of
reliance and use of the contents of this document. This document is to be used for comparison, research
and reference purposes ONLY. No part of this document may be reproduced, resold or transmitted in any
form or by any means.
, +27 67 171 1739
QUESTION 1
Voidable Preference
A voidable preference occurs when a debtor, shortly before becoming insolvent,
makes a payment or transfer to one creditor in a manner that places that creditor in a
better position than the others. This is prohibited because insolvency law is based on
the principle that creditors must be treated equally once sequestration takes place.
In order to have a voidable preference set aside in terms of section 29(1) of the
Insolvency Act, the trustee must establish the following:
The insolvent made a payment or transferred property, which constitutes a
disposition.
The disposition took place within six months prior to sequestration or death.
The transaction had the effect of giving one creditor an advantage over the
remaining creditors.
Immediately after the transaction, the debtor’s liabilities exceeded their
assets, meaning the debtor was factually insolvent.1
The trustee must prove all these requirements before the court will order that the
payment be reversed.2
(b) Undue Preference
An undue preference is more serious because it depends on the debtor’s intention. It
arises where the insolvent deliberately intended to favour one creditor over the
others before sequestration.
In terms of section 30 of the Insolvency Act, a court may set aside a disposition if the
trustee proves that:
The insolvent made a payment or transfer (a disposition).
The transaction occurred at any time before sequestration.
At the time of the transaction, the debtor’s liabilities exceeded their assets.
1
Insolvency Act 24 of 1936 s 29(1)
2
Hockly's Law of Insolvency, Winding-Up and Business Rescue (Juta 2022) 172
Disclaimer
Extreme care has been used to create this document, however the contents are provided “as is” without
any representations or warranties, express or implied. The author assumes no liability as a result of
reliance and use of the contents of this document. This document is to be used for comparison, research
and reference purposes ONLY. No part of this document may be reproduced, resold or transmitted in any
form or by any means.
Assignment 1 Semester 1 2026
Detailed Solutions, References & Explanations
Unique number:
Due Date: 2 March 2026
QUESTION 1
Voidable Preference
A voidable preference occurs when a debtor, shortly before becoming insolvent, makes a
payment or transfer to one creditor in a manner that places that creditor in a better position
than the others. This is prohibited because insolvency law is based on the principle that
creditors must be treated equally once sequestration takes place.
Terms of use
By making use of this document you agree to:
Use this document as a guide for learning, comparison and reference purpose,
Not to duplicate, reproduce and/or misrepresent the contents of this document as your own work,
Fully accept the consequences should you plagiarise or misuse this document.
Disclaimer
Extreme care has been used to create this document, however the contents are provided “as is” without
any representations or warranties, express or implied. The author assumes no liability as a result of
reliance and use of the contents of this document. This document is to be used for comparison, research
and reference purposes ONLY. No part of this document may be reproduced, resold or transmitted in any
form or by any means.
, +27 67 171 1739
QUESTION 1
Voidable Preference
A voidable preference occurs when a debtor, shortly before becoming insolvent,
makes a payment or transfer to one creditor in a manner that places that creditor in a
better position than the others. This is prohibited because insolvency law is based on
the principle that creditors must be treated equally once sequestration takes place.
In order to have a voidable preference set aside in terms of section 29(1) of the
Insolvency Act, the trustee must establish the following:
The insolvent made a payment or transferred property, which constitutes a
disposition.
The disposition took place within six months prior to sequestration or death.
The transaction had the effect of giving one creditor an advantage over the
remaining creditors.
Immediately after the transaction, the debtor’s liabilities exceeded their
assets, meaning the debtor was factually insolvent.1
The trustee must prove all these requirements before the court will order that the
payment be reversed.2
(b) Undue Preference
An undue preference is more serious because it depends on the debtor’s intention. It
arises where the insolvent deliberately intended to favour one creditor over the
others before sequestration.
In terms of section 30 of the Insolvency Act, a court may set aside a disposition if the
trustee proves that:
The insolvent made a payment or transfer (a disposition).
The transaction occurred at any time before sequestration.
At the time of the transaction, the debtor’s liabilities exceeded their assets.
1
Insolvency Act 24 of 1936 s 29(1)
2
Hockly's Law of Insolvency, Winding-Up and Business Rescue (Juta 2022) 172
Disclaimer
Extreme care has been used to create this document, however the contents are provided “as is” without
any representations or warranties, express or implied. The author assumes no liability as a result of
reliance and use of the contents of this document. This document is to be used for comparison, research
and reference purposes ONLY. No part of this document may be reproduced, resold or transmitted in any
form or by any means.
