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MRL3701: INSOLVENCY LAW 2026/2027 COMPLETE
CURRENT TESTING QUESTIONS AND CORRECT
ANSWERS WITH DETAILED RATIONALES.
MRL
Prepare for the MRL3701 Exam with this focused study resource designed to reinforce
essential course concepts and key material. Use it to review important topics,
strengthen your understanding, and identify areas that may require additional study.
This resource provides a structured supplement to your coursework and can help
improve your exam readiness. It is a convenient tool for organizing your preparation
and approaching the MRL3701 Exam with greater confidence.
MULTIPLE CHOICE.
Learning Unit 1: Introduction to Insolvency Law
1. Which of the following best describes the primary purpose of a
sequestration order in South African insolvency law?
A. To punish the debtor for failing to pay their debts.
B. To achieve a fair distribution of the debtor's available assets among
competing creditors.
C. To permanently bar the debtor from participating in the economy.
D. To allow the debtor to avoid all debts without any consequences.
Answer: B
Rationale: The primary purpose of sequestration is to ensure an orderly
and fair distribution of the debtor's assets among creditors in accordance
with the Insolvency Act 24 of 1936.
2. The legal test for insolvency in South African law is best described as:
A. When a debtor simply fails to pay a single debt on time.
B. When a debtor's liabilities, fairly estimated, exceed their assets, fairly
valued.
C. When a debtor has no cash available in their bank account.
D. When a debtor is declared insolvent by a creditor.
Answer: B
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Rationale: A debtor is legally insolvent when their liabilities, fairly
estimated, exceed their assets, fairly valued. This is the established test
in South African insolvency law.
3. Which legislation is the primary statute governing insolvency law for
natural persons in South Africa?
A. The Companies Act 71 of 2008.
B. The Insolvency Act 24 of 1936.
C. The Close Corporations Act 69 of 1984.
D. The National Credit Act 34 of 2005.
Answer: B
Rationale: The Insolvency Act 24 of 1936 is the principal legislation
governing the sequestration of natural persons' estates in South Africa.
4. The concept of concursus creditorum refers to:
A. The meeting of creditors to elect a trustee.
B. The collective interest of creditors that comes into existence upon
sequestration.
C. The process of proving claims against an insolvent estate.
D. The rehabilitation of an insolvent debtor.
Answer: B
Rationale: Concursus creditorum means the coming together of creditors,
representing the collective body of creditors whose rights are
consolidated and whose individual actions are stayed upon
sequestration.
5. Which of the following is NOT a source of South African insolvency law?
A. The Insolvency Act 24 of 1936.
B. Case law (judicial precedent).
C. The Constitution of the Republic of South Africa, 1996.
D. The English Insolvency Act of 1986.
Answer: D
Rationale: While South African insolvency law has historical roots in
Roman-Dutch and English law, the English Insolvency Act of 1986 is not a
source of South African law.
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6. The jurisdiction of the High Court to sequestrate an estate is governed
by:
A. Section 149 of the Insolvency Act 24 of 1936.
B. Section 8 of the Insolvency Act 24 of 1936.
C. Section 12 of the Insolvency Act 24 of 1936.
D. Section 21 of the Insolvency Act 24 of 1936.
Answer: A
Rationale: Section 149 of the Insolvency Act deals with the jurisdiction of
the court to sequestrate an estate.
7. In Ex parte Harmse (2005), the court considered the constitutionality of
certain provisions of the Insolvency Act. Which section was at issue?
A. Section 8.
B. Section 21.
C. Section 27.
D. Section 44.
Answer: C
Rationale: In Ex parte Harmse, the court examined whether section 27 of
the Insolvency Act, which deals with the vesting of the solvent spouse's
property, was inconsistent with the Constitution.
8. Which of the following is a key consequence of sequestration for the
insolvent debtor?
A. The debtor loses all contractual capacity.
B. The debtor is immediately discharged from all debts.
C. The debtor's assets vest in the trustee, and the debtor's contractual
capacity is limited.
D. The debtor must leave the country.
Answer: C
Rationale: Upon sequestration, the insolvent's estate vests in the trustee,
and the insolvent's capacity to contract and deal with their property is
restricted.
9. The term "free residue" in insolvency law refers to:
A. Assets that are exempt from attachment.
B. The portion of the estate remaining after secured creditors have been paid.
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C. The assets available for distribution to concurrent creditors after the costs
of sequestration and preferred claims have been paid.
D. The debtor's personal belongings.
Answer: C
Rationale: Free residue is the balance of the estate's assets available for
distribution to creditors after all costs of sequestration, secured claims,
and statutory preferences have been satisfied.
10. Which of the following is NOT a prescribed case for MRL3701?
A. Ex parte Arntzen.
B. Amod v Khan.
C. Sarrahwitz v Maritz NO.
D. Donoghue v Stevenson.
Answer: D
Rationale: Donoghue v Stevenson is a famous English tort law case and is
not a prescribed case for MRL3701.
11. The principle of paritas creditorum means:
A. Secured creditors have priority over unsecured creditors.
B. All creditors of the same class share proportionally in the distribution of the
estate's assets.
C. The debtor must be treated fairly.
D. Creditors must be paid in full before the debtor is rehabilitated.
Answer: B
Rationale: Paritas creditorum is the principle of equality among creditors
of the same class, meaning they share proportionally in the distribution of
assets.
12. Which section of the Insolvency Act provides that the estate of an
insolvent remains vested in the trustee until rehabilitation or
composition?
A. Section 20.
B. Section 25.
C. Section 21.
D. Section 22.
Answer: B
MRL3701: INSOLVENCY LAW 2026/2027 COMPLETE
CURRENT TESTING QUESTIONS AND CORRECT
ANSWERS WITH DETAILED RATIONALES.
MRL
Prepare for the MRL3701 Exam with this focused study resource designed to reinforce
essential course concepts and key material. Use it to review important topics,
strengthen your understanding, and identify areas that may require additional study.
This resource provides a structured supplement to your coursework and can help
improve your exam readiness. It is a convenient tool for organizing your preparation
and approaching the MRL3701 Exam with greater confidence.
MULTIPLE CHOICE.
Learning Unit 1: Introduction to Insolvency Law
1. Which of the following best describes the primary purpose of a
sequestration order in South African insolvency law?
A. To punish the debtor for failing to pay their debts.
B. To achieve a fair distribution of the debtor's available assets among
competing creditors.
C. To permanently bar the debtor from participating in the economy.
D. To allow the debtor to avoid all debts without any consequences.
Answer: B
Rationale: The primary purpose of sequestration is to ensure an orderly
and fair distribution of the debtor's assets among creditors in accordance
with the Insolvency Act 24 of 1936.
2. The legal test for insolvency in South African law is best described as:
A. When a debtor simply fails to pay a single debt on time.
B. When a debtor's liabilities, fairly estimated, exceed their assets, fairly
valued.
C. When a debtor has no cash available in their bank account.
D. When a debtor is declared insolvent by a creditor.
Answer: B
, Page 2 of 36
Rationale: A debtor is legally insolvent when their liabilities, fairly
estimated, exceed their assets, fairly valued. This is the established test
in South African insolvency law.
3. Which legislation is the primary statute governing insolvency law for
natural persons in South Africa?
A. The Companies Act 71 of 2008.
B. The Insolvency Act 24 of 1936.
C. The Close Corporations Act 69 of 1984.
D. The National Credit Act 34 of 2005.
Answer: B
Rationale: The Insolvency Act 24 of 1936 is the principal legislation
governing the sequestration of natural persons' estates in South Africa.
4. The concept of concursus creditorum refers to:
A. The meeting of creditors to elect a trustee.
B. The collective interest of creditors that comes into existence upon
sequestration.
C. The process of proving claims against an insolvent estate.
D. The rehabilitation of an insolvent debtor.
Answer: B
Rationale: Concursus creditorum means the coming together of creditors,
representing the collective body of creditors whose rights are
consolidated and whose individual actions are stayed upon
sequestration.
5. Which of the following is NOT a source of South African insolvency law?
A. The Insolvency Act 24 of 1936.
B. Case law (judicial precedent).
C. The Constitution of the Republic of South Africa, 1996.
D. The English Insolvency Act of 1986.
Answer: D
Rationale: While South African insolvency law has historical roots in
Roman-Dutch and English law, the English Insolvency Act of 1986 is not a
source of South African law.
, Page 3 of 36
6. The jurisdiction of the High Court to sequestrate an estate is governed
by:
A. Section 149 of the Insolvency Act 24 of 1936.
B. Section 8 of the Insolvency Act 24 of 1936.
C. Section 12 of the Insolvency Act 24 of 1936.
D. Section 21 of the Insolvency Act 24 of 1936.
Answer: A
Rationale: Section 149 of the Insolvency Act deals with the jurisdiction of
the court to sequestrate an estate.
7. In Ex parte Harmse (2005), the court considered the constitutionality of
certain provisions of the Insolvency Act. Which section was at issue?
A. Section 8.
B. Section 21.
C. Section 27.
D. Section 44.
Answer: C
Rationale: In Ex parte Harmse, the court examined whether section 27 of
the Insolvency Act, which deals with the vesting of the solvent spouse's
property, was inconsistent with the Constitution.
8. Which of the following is a key consequence of sequestration for the
insolvent debtor?
A. The debtor loses all contractual capacity.
B. The debtor is immediately discharged from all debts.
C. The debtor's assets vest in the trustee, and the debtor's contractual
capacity is limited.
D. The debtor must leave the country.
Answer: C
Rationale: Upon sequestration, the insolvent's estate vests in the trustee,
and the insolvent's capacity to contract and deal with their property is
restricted.
9. The term "free residue" in insolvency law refers to:
A. Assets that are exempt from attachment.
B. The portion of the estate remaining after secured creditors have been paid.
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C. The assets available for distribution to concurrent creditors after the costs
of sequestration and preferred claims have been paid.
D. The debtor's personal belongings.
Answer: C
Rationale: Free residue is the balance of the estate's assets available for
distribution to creditors after all costs of sequestration, secured claims,
and statutory preferences have been satisfied.
10. Which of the following is NOT a prescribed case for MRL3701?
A. Ex parte Arntzen.
B. Amod v Khan.
C. Sarrahwitz v Maritz NO.
D. Donoghue v Stevenson.
Answer: D
Rationale: Donoghue v Stevenson is a famous English tort law case and is
not a prescribed case for MRL3701.
11. The principle of paritas creditorum means:
A. Secured creditors have priority over unsecured creditors.
B. All creditors of the same class share proportionally in the distribution of the
estate's assets.
C. The debtor must be treated fairly.
D. Creditors must be paid in full before the debtor is rehabilitated.
Answer: B
Rationale: Paritas creditorum is the principle of equality among creditors
of the same class, meaning they share proportionally in the distribution of
assets.
12. Which section of the Insolvency Act provides that the estate of an
insolvent remains vested in the trustee until rehabilitation or
composition?
A. Section 20.
B. Section 25.
C. Section 21.
D. Section 22.
Answer: B
