, MRL3701 ASSIGNMENT 1 SEMESTER 1 ANSWERS & REFERENCES
MRL3701 ASSIGNMENT 1 SEMESTER 1 2026
ANSWERS
DUE DATE: 2 MARCH 2026
(a) Voidable Preference
A voidable preference is a statutory remedy designed to protect the concursus
creditorum and the fundamental insolvency principle that creditors should be treated
equally once sequestration becomes imminent. It is regulated by s 29 of the Insolvency
Act 24 of 1936. The provision recognises that an insolvent debtor may, shortly before
sequestration, make payments or dispositions that have the effect of preferring one
creditor over others. Such transactions are not automatically void, but they are
voidable at the instance of the trustee once sequestration has occurred.
In terms of s 29(1), four essential requirements must be established before a court will
set aside a disposition as a voidable preference. First, there must have been a
disposition of property by the debtor. The Act defines “disposition” broadly in s 2 and
it includes the payment of money, the transfer of rights, or any act diminishing the
estate. Second, the disposition must have been made within six months before
sequestration. The six-month period is calculated backwards from the date of
sequestration and serves as a statutory control on suspicious pre-insolvency
transactions. Third, at the time of the disposition, the debtor’s liabilities must have
exceeded her assets. This requirement refers to factual insolvency rather than mere
commercial inability to pay debts.1 Fourth, the disposition must have had the effect of
preferring one creditor above others, meaning that the transaction improved the
1
Insolvency Act 24 of 1936 s 29(1).
MRL3701 ASSIGNMENT 1 SEMESTER 1 2026
ANSWERS
DUE DATE: 2 MARCH 2026
(a) Voidable Preference
A voidable preference is a statutory remedy designed to protect the concursus
creditorum and the fundamental insolvency principle that creditors should be treated
equally once sequestration becomes imminent. It is regulated by s 29 of the Insolvency
Act 24 of 1936. The provision recognises that an insolvent debtor may, shortly before
sequestration, make payments or dispositions that have the effect of preferring one
creditor over others. Such transactions are not automatically void, but they are
voidable at the instance of the trustee once sequestration has occurred.
In terms of s 29(1), four essential requirements must be established before a court will
set aside a disposition as a voidable preference. First, there must have been a
disposition of property by the debtor. The Act defines “disposition” broadly in s 2 and
it includes the payment of money, the transfer of rights, or any act diminishing the
estate. Second, the disposition must have been made within six months before
sequestration. The six-month period is calculated backwards from the date of
sequestration and serves as a statutory control on suspicious pre-insolvency
transactions. Third, at the time of the disposition, the debtor’s liabilities must have
exceeded her assets. This requirement refers to factual insolvency rather than mere
commercial inability to pay debts.1 Fourth, the disposition must have had the effect of
preferring one creditor above others, meaning that the transaction improved the
1
Insolvency Act 24 of 1936 s 29(1).
