Module code:
MRL3701.
Question 1
a. Purpose of a Sequestration Order
The main objective of a sequestration order is to secure the orderly and equitable
distribution of a debtor’s assets where they are insufficient to meet the claims of all his
creditors. This process is a collective debt-collection procedure that comes into
operation on sequestration, designed to ensure that a debtor's assets are liquidated
and distributed among all creditors according to a predetermined and fair order of
preference. It is essential to distinguish this from individual initiatives by creditors to
recover their debts. Once a provisional or final sequestration order is granted, a
concursus creditorum (a "coming together of creditors" or a concourse of creditors) is
established.1 This means that the interests of creditors as a group enjoy preference
over the interests of individual creditors. The debtor is divested of their estate and
cannot incur further debts, secondly the process of sequestration ensures a due
distribution of assets among creditors in the order of their preference. A creditor's right
to recover their claim in full by judicial proceedings is replaced by the right, upon
proving a claim, to share with all other proved creditors in the proceeds of the estate
assets, thirdly the law of insolvency exists primarily for the benefit of creditors. A court
will generally not sequestrate a debtor's estate unless it is shown that the
sequestration will be to the advantage of creditors, meaning it is expected to yield an
appreciable dividend for creditors after the costs of sequestration are met.
Sequestration is typically not ordered if the assets would be consumed by the process
itself, leaving nothing for creditors moreover Insolvency proceedings also serve to
protect creditors against other creditors' greediness and dishonesty.2
b)
According to Smith, Van der Linde and Calitz (2022), the winding-up process,
Thandeka and Owen will generally not be able to successfully apply for the
sequestration of both their estates in a single application, because firstly Thandeka
and Owen are married out of community of property.3 In such a marriage, each spouse
1 A Smith, K van der Linde and J Calitz, Hockly’s Law of Insolvency, Winding-up and Business Rescue (10th edn,
Juta 2022) 23.
2
A Smith, K van der Linde and J Calitz, Hockly’s Law of Insolvency, Winding-up and Business Rescue (10th edn,
Juta 2022) 25.
3
A Smith, K van der Linde and J Calitz, Hockly’s Law of Insolvency, Winding-up and Business Rescue (10th edn,
Juta 2022) 44.
MRL3701.
Question 1
a. Purpose of a Sequestration Order
The main objective of a sequestration order is to secure the orderly and equitable
distribution of a debtor’s assets where they are insufficient to meet the claims of all his
creditors. This process is a collective debt-collection procedure that comes into
operation on sequestration, designed to ensure that a debtor's assets are liquidated
and distributed among all creditors according to a predetermined and fair order of
preference. It is essential to distinguish this from individual initiatives by creditors to
recover their debts. Once a provisional or final sequestration order is granted, a
concursus creditorum (a "coming together of creditors" or a concourse of creditors) is
established.1 This means that the interests of creditors as a group enjoy preference
over the interests of individual creditors. The debtor is divested of their estate and
cannot incur further debts, secondly the process of sequestration ensures a due
distribution of assets among creditors in the order of their preference. A creditor's right
to recover their claim in full by judicial proceedings is replaced by the right, upon
proving a claim, to share with all other proved creditors in the proceeds of the estate
assets, thirdly the law of insolvency exists primarily for the benefit of creditors. A court
will generally not sequestrate a debtor's estate unless it is shown that the
sequestration will be to the advantage of creditors, meaning it is expected to yield an
appreciable dividend for creditors after the costs of sequestration are met.
Sequestration is typically not ordered if the assets would be consumed by the process
itself, leaving nothing for creditors moreover Insolvency proceedings also serve to
protect creditors against other creditors' greediness and dishonesty.2
b)
According to Smith, Van der Linde and Calitz (2022), the winding-up process,
Thandeka and Owen will generally not be able to successfully apply for the
sequestration of both their estates in a single application, because firstly Thandeka
and Owen are married out of community of property.3 In such a marriage, each spouse
1 A Smith, K van der Linde and J Calitz, Hockly’s Law of Insolvency, Winding-up and Business Rescue (10th edn,
Juta 2022) 23.
2
A Smith, K van der Linde and J Calitz, Hockly’s Law of Insolvency, Winding-up and Business Rescue (10th edn,
Juta 2022) 25.
3
A Smith, K van der Linde and J Calitz, Hockly’s Law of Insolvency, Winding-up and Business Rescue (10th edn,
Juta 2022) 44.
