, PLEASE USE THIS DOCUMENT AS A GUIDE ONLY
Question 1
1. Advise Steelcor (Pty) Ltd on the requirements it must prove to convince a court to grant an
application for compulsory sequestration.
Introduction and Legal Framework
In advising Steelcor (Pty) Ltd, it is necessary to set out the legal position on the requirements for an
act of insolvency under s 8(a) of the Insolvency Act 24 of 1936, and then apply these principles to
Naledi's circumstances. The relevant provision states that a debtor commits an act of insolvency if
she leaves the Republic, or being out of the Republic remains absent from it, or departs from her
dwelling or otherwise absents herself, with intent by so doing to evade or delay the payment of her
debts.¹ This constitutes one of the eight acts of insolvency listed in section 8(a) to (h) of the Act.²
Requirements of Section 8(a)
Section 8(a) establishes three distinct requirements that must be satisfied before a debtor can be
found to have committed this act of insolvency. The first requirement is physical absence: the debtor
must have left the Republic, or being out of the Republic remains absent from it, or departs from her
dwelling or otherwise absents herself.³ This requirement is factual and objective in nature—the court
examines whether the debtor has physically removed herself from the relevant location. The second
requirement is the debtor's state of mind or intention: the debtor must have acted with the specific
intention of evading or delaying payment of her debts.⁴ The third requirement is that the debtor's
physical absence must have been motivated by this evasive intention.
The Intention Requirement and Its Proof
The intention requirement is the most critical element of section 8(a), as proof of mere departure or
absence is insufficient by itself to establish an act of insolvency.⁵ A person may leave or absent
herself for reasons entirely unconnected with the payment of debts, such as to visit an ill relative,
avoid a deterioration in health, join a close relative, or attend to family emergencies.⁶ The test for
determining the debtor's intention is subjective, meaning the court must examine what the debtor
actually intended at the time of departure or absence, rather than applying an objective standard of
what a reasonable person might have intended.⁷
The subjective nature of this test means that the creditor bears the burden of proving that the debtor's
only probable inference to be drawn from her conduct was that she intended to evade or delay
payment.⁸ This is typically established through circumstantial evidence, as direct proof of a debtor's
state of mind is rarely available.⁹ Factors from which the intention to evade or delay payment may be
inferred include that the debtor made an appointment to make a payment and then left without
keeping it, or that the debtor disposed of business assets or terminated a business lease before
leaving.¹⁰
¹ (MRL3701, Study Guide, p. 43); (Smith, 2022, pp. 44-45)
² (MRL3701, Study Guide, p. 45); (Smith, 2022, p. 45)
³ (MRL3701, Study Guide, p. 45); (Smith, 2022, p. 44)
⁴ (Smith, 2022, pp. 44-45)
⁵ (MRL3701, Study Guide, p. 45); (Smith, 2022, p. 45)
⁶ (MRL3701, Study Guide, p. 45); (Smith, 2022, p. 45)
⁷ (MRL3701, Study Guide, p. 45); (Smith, 2022, p. 45)
⁸ (Smith, 2022, p. 45)
⁹ (MRL3701, Study Guide, p. 45); (Smith, 2022, p. 45)
¹⁰ (Smith, 2022, p. 45)
Question 1
1. Advise Steelcor (Pty) Ltd on the requirements it must prove to convince a court to grant an
application for compulsory sequestration.
Introduction and Legal Framework
In advising Steelcor (Pty) Ltd, it is necessary to set out the legal position on the requirements for an
act of insolvency under s 8(a) of the Insolvency Act 24 of 1936, and then apply these principles to
Naledi's circumstances. The relevant provision states that a debtor commits an act of insolvency if
she leaves the Republic, or being out of the Republic remains absent from it, or departs from her
dwelling or otherwise absents herself, with intent by so doing to evade or delay the payment of her
debts.¹ This constitutes one of the eight acts of insolvency listed in section 8(a) to (h) of the Act.²
Requirements of Section 8(a)
Section 8(a) establishes three distinct requirements that must be satisfied before a debtor can be
found to have committed this act of insolvency. The first requirement is physical absence: the debtor
must have left the Republic, or being out of the Republic remains absent from it, or departs from her
dwelling or otherwise absents herself.³ This requirement is factual and objective in nature—the court
examines whether the debtor has physically removed herself from the relevant location. The second
requirement is the debtor's state of mind or intention: the debtor must have acted with the specific
intention of evading or delaying payment of her debts.⁴ The third requirement is that the debtor's
physical absence must have been motivated by this evasive intention.
The Intention Requirement and Its Proof
The intention requirement is the most critical element of section 8(a), as proof of mere departure or
absence is insufficient by itself to establish an act of insolvency.⁵ A person may leave or absent
herself for reasons entirely unconnected with the payment of debts, such as to visit an ill relative,
avoid a deterioration in health, join a close relative, or attend to family emergencies.⁶ The test for
determining the debtor's intention is subjective, meaning the court must examine what the debtor
actually intended at the time of departure or absence, rather than applying an objective standard of
what a reasonable person might have intended.⁷
The subjective nature of this test means that the creditor bears the burden of proving that the debtor's
only probable inference to be drawn from her conduct was that she intended to evade or delay
payment.⁸ This is typically established through circumstantial evidence, as direct proof of a debtor's
state of mind is rarely available.⁹ Factors from which the intention to evade or delay payment may be
inferred include that the debtor made an appointment to make a payment and then left without
keeping it, or that the debtor disposed of business assets or terminated a business lease before
leaving.¹⁰
¹ (MRL3701, Study Guide, p. 43); (Smith, 2022, pp. 44-45)
² (MRL3701, Study Guide, p. 45); (Smith, 2022, p. 45)
³ (MRL3701, Study Guide, p. 45); (Smith, 2022, p. 44)
⁴ (Smith, 2022, pp. 44-45)
⁵ (MRL3701, Study Guide, p. 45); (Smith, 2022, p. 45)
⁶ (MRL3701, Study Guide, p. 45); (Smith, 2022, p. 45)
⁷ (MRL3701, Study Guide, p. 45); (Smith, 2022, p. 45)
⁸ (Smith, 2022, p. 45)
⁹ (MRL3701, Study Guide, p. 45); (Smith, 2022, p. 45)
¹⁰ (Smith, 2022, p. 45)
