Insolvency Law MRL3701 Department of Mercantile Law Assessment 1 Semester 1202 5
QUESTION: Thabo owes an amount of R2 567 374.00 to his creditors. Since Thabo’s retrenchment by his
longstanding employer in March 2024, Thabo has been experiencing ongoing financial difficulty. He has
failed to pay his debts over the past few months, and since 30 November 2024 his liabilities have
exceeded his assets. Maria is one of Thabo’s creditors, who is owed an amount of R320 000 by Thabo.
Thabo’s debt to Maria was due and payable on 5 January 2025, but Thabo failed to pay the debt.
Disappointed at this, Mari a undertook an investigation into Thabo’s financial affairs. She has established
that Thabo owns an apartment valued at R2 250 000 and furniture valued at R300,000. She has also
discovered that Thabo had owed his cousin an amount of R400,000, which was due and payable only on
30 April 2025, and that Thabo had made an early repayment in full to his cousin on 29 January 2025.
Thabo had wanted to ensure that should one o f his creditors apply for the sequestration of his estate,
his family members would not suffer any financial loss. With the above in mind, d a court order for the
iscuss whether Maria is likely to be successful in an application for sequestration of Thabo’s estate.
Include in your discussion the requirements she must prove to succeed with such an application. TOTAL
FOR ASSIGNMENT 01 : [10] 3
For Maria to be successful in applying for the sequestration of Thabo’s estate, she will need to satisfy
the requirements set out in the Insolvency Act 24 of 1936. Below is a detailed discussion of whether
Maria is likely to succeed in her application, including the key requirements she must prove.
1. REQUIREMENTS FOR A SEQUESTRATION ORDER
Maria must prove the following to the court:
1.1 Thabo is factually insolvent
A debtor is factually insolvent if their liabilities exceed their assets.
Thabo's assets:
, Apartment: R2,250,000
Furniture: R300,000
Total assets: R2,550,000
Thabo’s liabilities:
Total debts: R2,567,374
Thabo’s liabilities exceed his assets by R17,374, confirming that he is factually insolvent.
1.2 Thabo has committed an act of insolvency
Maria must prove that Thabo committed one of the acts of insolvency listed in Section 8 of the
Insolvency Act. The relevant act of insolvency here is:
Section 8(c) – Failure to satisfy a judgment debt
Thabo owes Maria R320,000, which became due and payable on 5 January 2025.
Thabo failed to pay this debt when it became due.
This failure to pay is prima facie evidence of an act of insolvency.
1.3 There is reason to believe sequestration will benefit creditors
The court must be satisfied that sequestrating Thabo’s estate will be to the advantage of his creditors.
This means that there must be a reasonable prospect that creditors will receive some payment from the
insolvent estate.
Thabo’s financial position:
Assets available for creditors: R2,550,000
Liabilities: R2,567,374
Although Thabo is factually insolvent, his assets are close in value to his liabilities. Therefore, it is likely
that creditors will receive a dividend from the sale of his assets if his estate is sequestrated.
QUESTION: Thabo owes an amount of R2 567 374.00 to his creditors. Since Thabo’s retrenchment by his
longstanding employer in March 2024, Thabo has been experiencing ongoing financial difficulty. He has
failed to pay his debts over the past few months, and since 30 November 2024 his liabilities have
exceeded his assets. Maria is one of Thabo’s creditors, who is owed an amount of R320 000 by Thabo.
Thabo’s debt to Maria was due and payable on 5 January 2025, but Thabo failed to pay the debt.
Disappointed at this, Mari a undertook an investigation into Thabo’s financial affairs. She has established
that Thabo owns an apartment valued at R2 250 000 and furniture valued at R300,000. She has also
discovered that Thabo had owed his cousin an amount of R400,000, which was due and payable only on
30 April 2025, and that Thabo had made an early repayment in full to his cousin on 29 January 2025.
Thabo had wanted to ensure that should one o f his creditors apply for the sequestration of his estate,
his family members would not suffer any financial loss. With the above in mind, d a court order for the
iscuss whether Maria is likely to be successful in an application for sequestration of Thabo’s estate.
Include in your discussion the requirements she must prove to succeed with such an application. TOTAL
FOR ASSIGNMENT 01 : [10] 3
For Maria to be successful in applying for the sequestration of Thabo’s estate, she will need to satisfy
the requirements set out in the Insolvency Act 24 of 1936. Below is a detailed discussion of whether
Maria is likely to succeed in her application, including the key requirements she must prove.
1. REQUIREMENTS FOR A SEQUESTRATION ORDER
Maria must prove the following to the court:
1.1 Thabo is factually insolvent
A debtor is factually insolvent if their liabilities exceed their assets.
Thabo's assets:
, Apartment: R2,250,000
Furniture: R300,000
Total assets: R2,550,000
Thabo’s liabilities:
Total debts: R2,567,374
Thabo’s liabilities exceed his assets by R17,374, confirming that he is factually insolvent.
1.2 Thabo has committed an act of insolvency
Maria must prove that Thabo committed one of the acts of insolvency listed in Section 8 of the
Insolvency Act. The relevant act of insolvency here is:
Section 8(c) – Failure to satisfy a judgment debt
Thabo owes Maria R320,000, which became due and payable on 5 January 2025.
Thabo failed to pay this debt when it became due.
This failure to pay is prima facie evidence of an act of insolvency.
1.3 There is reason to believe sequestration will benefit creditors
The court must be satisfied that sequestrating Thabo’s estate will be to the advantage of his creditors.
This means that there must be a reasonable prospect that creditors will receive some payment from the
insolvent estate.
Thabo’s financial position:
Assets available for creditors: R2,550,000
Liabilities: R2,567,374
Although Thabo is factually insolvent, his assets are close in value to his liabilities. Therefore, it is likely
that creditors will receive a dividend from the sale of his assets if his estate is sequestrated.
