Insolvency Law incorporating Sequestration, Liquidation and Business Rescue becomes relevant when under circumstances objectively determined, liabilities, fairly estimated exceed the assets also fairly valued, insolvency may be established. Creditors have different legal remedies available to recover payment from a debtor i.e. summons, judgment, warrant of execution, garnishee or emoluments attachment order. In the event that the aforementioned legal procedures do not assist a creditor in recovering the debt, then recourse may be had to the Insolvency Act No. 24 of 1936 (as amended).
The estate of a debtor may be sequestrated at his/her own formal request by making application to the High Court of South Africa for the acceptance of the surrender of the estate. The cardinal test to the granting of such an application is whether there will be an advantage to creditors if the estate is sequestrated.
A creditor with an unpaid and provable claim on face value of at least R100.00 (one hundred rands) may apply to Court for the compulsory sequestration of the debtor’s estate. On obtaining a Court Order the insolvent is divested of his/her estate and managed by a trustee or in the case of a company a liquidator, who shall act in the best interests of a body of creditors. All civil proceedings are stayed and the claim of each creditor is dealt with as it existed at the issue date of the Court Order. The restoration of solvency status prior to 10 (ten) years from date of the Court Order is not a right, but conditional on the conduct of the insolvent and subject to judicial discretion.
Business Rescue envisages the reorganisation of a company which is in financial distress to restore it to financial viability as provided for by the Companies Act No. 71 of 2008.
Please also visit and view Commercial Law hereinabove and Contract, Suretyship and Credit Law hereunder as related subject topic(s).