MRL3701 Insolvency Law LATEST EXAM PACK .

MRL3701 Insolvency Law LATEST EXAM PACK . Question 1 Fill in the missing words: (a) The term "debtor" also embraces a person who is incapable of managing his own affairs. (2) (b) Thabo’s application for voluntary surrender must contain an allegation that it will be to the advantage of creditors if his estate is sequestrated. (2) (c) Christopher commits an act of insolvency by departing from his dwelling with the intent by doing so to evade payments of his debts. (2) (d) An application for compulsory sequestration brought by a creditor who is not at arm’s length is generally referred to as a " friendly " sequestration. (2) (e) Section 24(1) of the Insolvency Act which deals with the effect of prohibited contracts on third parties, places the onus upon a third party to prove that, at the time he received the property in question, he was neither aware, nor had any reason to suspect, that the debtor was insolvent. (2) (f) An insolvent’s right to earn and recover income relates only to lawful income. (2) (g) The solvent spouse must, within 7 days of service, lodge with the Master a statement of his/her affairs as at the date of sequestration, framed by the necessary requirements and verified by affidavit. (2) (h) With regard to a contract completed by an insolvent, a right to performance held by the estate lapses if the other party in good faith, and without knowledge of the sequestration, performs to the insolvent. (2) (i) Section 84(2) of the Insolvency Act, which deals with the returning of property sold in terms of an "instalment agreement" to the seller, is intended to enable the trustee to reclaim the property for the benefit of concurrent creditors. (2) (j) Regarding the meeting of creditors, the publication of any statement of affairs made at a meeting is priveleged to the same extent as the publication of a statement made in a court of law. (2) (k) The Master may remove a trustee from office on the ground that the majority of creditors has requested in writing that he be removed. (2) (l) The object of section 26 of the Insolvency Act is simply to prevent a person in insolvent circumstances from impoverishing his estate by giving away assets without receiving any appreciable advantage in return. (2) (m) In deciding whether a disposition was made in the ordinary course of business, an objective test is applied. (2) (n) In Estate Wege v Strauss 1932 AD 76 it was decided that although a wagering debt cannot be enforced in a court of law, it still creates a "natural obligation ". (2) (o) Compared to a common-law compromise, the main advantage of a statutory composition is that it does not depend on the consent (p) An application for rehabilitation is brought by way of notice of motion supported by affidavit. (2) (q) A sequestration of a partner’s estate, ipso iure, terminates the partnership.(2) (r) A creditors’ voluntary winding-up, unlike a members’ voluntary winding-up or voluntary winding-up by the company, will be resorted to where the company is unable to pay its debts. (2) (s) Section 7(k) of the Companies Act 2008 provides for "the efficient rescue and recovery of financially distressed companies, in a manner that balances the rights and interests of all relevant stakeholders". (2) (t) In voluntary business rescue, the board cannot pass a resolution if the company is already the subject of liquidation proceedings. (2) TOTAL QUESTION 1: [40] Question 2 Indicate whether the following statements are true or false and motivate the reason for your answer. 1. Once an order of or a provisional order of sequestration is granted, a concursus creditorum is established, and the interests of creditors as a group enjoy preference over the interests of individual creditors. (2) True. This is designed to ensure that whatever assets the debtor has, are liquidated and distributed among all his creditors in accordance with a predetermined and fair order of prefera 2. The "costs of sequestration" only include the costs of surrender. (2) False. It also includes all the general costs of administration. 3. The removal of property with intent to prejudice or prefer is not one of the listed grounds that may be deemed as "acts of insolvency" in terms of section 8 of the Insolvency Act 24 of 1936. (2) False. The intention of the debtor to prejudice his creditors or to give preference is important and is one of the listed grounds 4. The debtor may make a contract that purports to dispose of any property of his insolvent estate. (2) False. The debtor may not make a contract which purports to dispose of any property of his insolvent estate 5. The courts have held that the after-acquired estate of an insolvent debtor may never again be sequestrated. (2) False. This is due to sometimes the insolvent during the period of insolvency may acquire a new estate and hold it with another title, the after-acquired estate can in turn be sequestrated. 6. Section 21 of the Insolvency Act applies to all spouses married in community of property. (2) False. The provision applies only to marriages out of community of property. 7. As a general rule, sequestration suspends or puts to an end any contract which the insolvent had concluded. (2) False. As a general rule, sequestration does not suspend or put an end to the contract. 8. An insolvent may be interrogated at a special meeting convened for that purpose, provided the Master gives his consent. (2) True. With the master’s consent, the trustee may and if so required convene a special meeting for the purpose of interrogating the insolvent. 9. A disposition made in fraud of creditors may be set aside in terms of the common law. (2) True. These dispositions are set aside by means of the action Pauliana, in terms of the common law. 10. If movable property has been delivered to a debtor under an instalment agreement, the seller acquires ownership over the property, on sequestration. (2) True. This secures the claim for the balance outstanding under the contract. 11. In Ex parte Snooke 2014 (5) SA 426 (FB), the judge criticised the excessive legal fees charged but held that there was no abuse of the process of voluntary surrender. (2) False. The judge criticised the excessive legal fees charged and held that there was an abuse of the process of voluntary surrender. 12. An application to surrender a partnership estate must, as a rule, be brought by only one partner. (2) False. As a rule it must be bought by all the partners or their agents. 13. In the case of a voluntary winding-up of a company by the court, the court decides whether the company will be placed in liquidation. (2) True. It is the court that decides if the company will be placed in liquidation, if it is a winding – up by the court. 14. The court having jurisdiction to wind-up a close corporation is the court where the corporation’s registered office or main place of business is situated. (2) True. This could be either the High Court or magistrate’s court which has jurisdiction where the corporation’s registered office or main place of business is situated. 15. Section 44 of the previous Insurance Act 27 of 1943 restricted married women and men to a portion of the benefits of life insurance policies when their estate is sequestrated. (2) False. The previous insurance Act 27 of 1943 restricted married woman only and not men to a portion of the benefits of life insurance policies where the estate of the husband was sequestrated. TOTAL QUESTION 2: [30] Question 3 (a) Give reasons why a sequestration order may not be granted if a debtor has only one creditor or if there are not enough assets to cover the costs of sequestration. (3) There will be no conflicting interests between creditors which must be equitably resolved if there is only one creditor. Further, if the debtor’s assets are not sufficient to cover the cost’s of sequestration, there is no advantage to be derived from sequestration process to any creditors. In the caseas depicted above, sequestration would merely amount to a waste of time and money.