INSOLVENCY LAW
NOTES & CASES
Joseph
0784683517
, 1
Contents
PART 1
Introduction
1. Introduction
PART 2
Obtaining a sequestration order
2. Voluntary surrender
3. Compulsory sequestration
PART 3
Effects of sequestration
4. The legal position of the insolvent
5. Vesting of the assests of the insolvent
6. Vesting of the assets of the solvent spouse
7. Uncompleted contracts and legal proceedings
not yet finalized
PART 4
Collection of the estate assets
trustee’s
8. Meetings of creditors and proof claims
9. The election of the trustee
trustee
10. Impeachable dispositions
PART 5
Realization and distribution of the assets
11. Creditors’ claims and their ranking
PART 6
Composition and rehabilitation
12. Composition
13. Rehabilitation
PART 7
Miscellaneous
14. Partnership and sequestration
PART 8
“The expert in anything was once a beginner”
, 2
Winding-up of companies and close corporations
15. Winding-up of companies
16. Judicial management and compromise
17. Winding-up of close corporations
“The expert in anything was once a beginner”
, 3
PART 1:
INTRODUCTION
1. Introduction
Meaning of: “Insolvency”
A person is insolvent when his liabilities exceed his assets. Inability to pay debt is, at
most, merely evidence of insolvency.
A person who has insufficient assets to discharge his liabilities, although satisfying the
test of insolvency, is not treated as insolvent for legal purposes unless his estate has
been sequestrated by an order of the court.
A sequestration order is a formal declaration that a debtor is insolvent, the order is
granted either when the debtor voluntarily surrenders or where one or more of the
debtor’s creditors apply for compulsory sequestration.
The purpose of a sequestration order
Is to secure the orderly and equitable distribution of a debtor’s assets where they are
insufficient to meet the claims of all his creditors.
Executing against the property of a debtor who is in insolvent circumstances inevitably
results in one or a few creditors being paid, and the rest receiving little or nothing at all.
Thus the legal machinery that comes into operation during sequestration is designed to
ensure that whatever assets the debtor has are liquidated and distribution among all his
creditors in accordance with a predetermined fair order of preference.
Once an order of sequestration is granted, a concursus creditorum (coming together of
creditors) is established, and the interests of the creditors as a group enjoy preference
over the interests of individual creditors.
A creditor’s right recover his claim in full by judicial proceedings is replaced with the
right, on proving a claim against the insolvent estate, to share with all other proved
creditors in the proceeds of the estate assets.
Apart from what is permitted by the Act, nothing may be done which would diminish the
assets of the estate or prejudice the rights of creditors.
The law of insolvency exist primarily for the benefit of the creditors, thus a court will not
sequestrate a debtor’s estate unless it’s known that the sequestration will be to the
benefit of the creditors. Thus a sequestration order would not be granted if there is only
one creditor or if the debtor’s assets are not sufficient to cover the costs of
“The expert in anything was once a beginner”
NOTES & CASES
Joseph
0784683517
, 1
Contents
PART 1
Introduction
1. Introduction
PART 2
Obtaining a sequestration order
2. Voluntary surrender
3. Compulsory sequestration
PART 3
Effects of sequestration
4. The legal position of the insolvent
5. Vesting of the assests of the insolvent
6. Vesting of the assets of the solvent spouse
7. Uncompleted contracts and legal proceedings
not yet finalized
PART 4
Collection of the estate assets
trustee’s
8. Meetings of creditors and proof claims
9. The election of the trustee
trustee
10. Impeachable dispositions
PART 5
Realization and distribution of the assets
11. Creditors’ claims and their ranking
PART 6
Composition and rehabilitation
12. Composition
13. Rehabilitation
PART 7
Miscellaneous
14. Partnership and sequestration
PART 8
“The expert in anything was once a beginner”
, 2
Winding-up of companies and close corporations
15. Winding-up of companies
16. Judicial management and compromise
17. Winding-up of close corporations
“The expert in anything was once a beginner”
, 3
PART 1:
INTRODUCTION
1. Introduction
Meaning of: “Insolvency”
A person is insolvent when his liabilities exceed his assets. Inability to pay debt is, at
most, merely evidence of insolvency.
A person who has insufficient assets to discharge his liabilities, although satisfying the
test of insolvency, is not treated as insolvent for legal purposes unless his estate has
been sequestrated by an order of the court.
A sequestration order is a formal declaration that a debtor is insolvent, the order is
granted either when the debtor voluntarily surrenders or where one or more of the
debtor’s creditors apply for compulsory sequestration.
The purpose of a sequestration order
Is to secure the orderly and equitable distribution of a debtor’s assets where they are
insufficient to meet the claims of all his creditors.
Executing against the property of a debtor who is in insolvent circumstances inevitably
results in one or a few creditors being paid, and the rest receiving little or nothing at all.
Thus the legal machinery that comes into operation during sequestration is designed to
ensure that whatever assets the debtor has are liquidated and distribution among all his
creditors in accordance with a predetermined fair order of preference.
Once an order of sequestration is granted, a concursus creditorum (coming together of
creditors) is established, and the interests of the creditors as a group enjoy preference
over the interests of individual creditors.
A creditor’s right recover his claim in full by judicial proceedings is replaced with the
right, on proving a claim against the insolvent estate, to share with all other proved
creditors in the proceeds of the estate assets.
Apart from what is permitted by the Act, nothing may be done which would diminish the
assets of the estate or prejudice the rights of creditors.
The law of insolvency exist primarily for the benefit of the creditors, thus a court will not
sequestrate a debtor’s estate unless it’s known that the sequestration will be to the
benefit of the creditors. Thus a sequestration order would not be granted if there is only
one creditor or if the debtor’s assets are not sufficient to cover the costs of
“The expert in anything was once a beginner”
