Compulsory Sequestration Gauteng
WHAT IS COMPULSORY SEQUESTRATION UNDER SECTION 9(1) OF THE ACT?
Compulsory sequestration is a legal process that allows creditors to initiate the sequestration of a debtor’s estate when the debtor is unable to pay their debts. Section 9(1) of the Insolvency Act in South Africa, provides the framework for this procedure, outlining the conditions under which a creditor can apply for a sequestration order. This section serves as a crucial mechanism for creditors seeking to recover debts, as well as a means to ensure that debtors who are unable to meet their financial obligations are subjected to a structured process of asset liquidation. Understanding the provisions of Section 9(1) is essential for both creditors and debtors to navigate the complexities of insolvency law effectively. It is important to note that Compulsory sequestration is distinctly different from voluntary sequestration/surrender in that it is initiated by and on behalf of the creditors rather than the debtor.
WHAT ARE THE REQUIREMENTS TO APPLY FOR COMPULSORY SEQUESTRATION?
The court will only grant the application if the following requirements are met:
- Claim Requirements (Section 9(1) of the Insolvency Act): A single creditor must have a liquidated claim of at least R100.00. If there are multiple creditors, their combined liquidated claim must be at least R200.00.
- Insolvency: The debtor must have committed an act of insolvency or be deemed insolvent.
- Benefit to Creditors: There must be a reasonable belief that the sequestration of the estate will be to the advantage of all creditors, meaning the process will likely yield a better return for them than if the debtor remains in control of their assets.
HOW DO CREDITORS PROVE A COMPULSORY SEQUESTRATION?
Acts of insolvency were identified to simplify the process for creditors to prove that a person is insolvent. Specific actions or omissions by the debtor can lead creditors to reasonably doubt the solvency of the debtor’s estate. If the debtor engages in these actions or omissions, and the creditor can provide evidence, it increases the likelihood of the debtor’s estate being sequestrated.
These acts or omissions are outlined in Section 8 of the Insolvency Act: (H4)
- Section 8(a): The debtor leaves South Africa or their home, or remains absent, to evade or delay paying their debts. In this case, the creditor must prove the debtor’s intention to evade or delay payments.
- Section 8(b): The debtor fails to satisfy a judgment ordering them to pay money and does not indicate sufficient disposable property to satisfy the judgment when asked by the officer executing the judgment. This also applies if the officer returns with an indication of insufficient property.
- Section 8(c): The debtor shows preference for one creditor or attempts to pay one creditor over others, prejudicing other creditors.
- Section 8(d): The debtor favors or tries to favor one creditor by removing or attempting to remove property, causing prejudice to other creditors.
- Section 8(e): The debtor makes or attempts to make arrangements with creditors to release them wholly or partly from their obligations.
- Section 8(f): The debtor fails to apply for surrender as required by Section 4(3) of the Insolvency Act.
- Section 8(g): The debtor provides written notice to their creditors that they cannot pay their debts.
- Section 8(h): A business owner who, after attempting to transfer or successfully transferring their business as per Section 34(1), is unable to pay their debts.
CONSEQUENCES OF BEING DECLARED INSOLVENT
Being declared insolvent has significant implications for an individual’s status:
- Credit and Loans: The individual will find it more challenging to obtain credit or loans.
- Professional Exclusions: The individual will be excluded from certain professions, such as serving as a director or liquidator.
If you find yourself facing the possibility of sequestration, it is highly advisable to consult with one of the insolvency attorneys at Burger Huyser Attorneys. Our attorneys are well-versed in the liquidation and sequestration process and can guide and assist you in regaining control over your financial matters. For expert advice and assistance, contact Burger Huyser Attorneys today.
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Contact our insolvency attorneys at Burger Huyser Attorneys Gauteng today as we have gained vast experience in dealing with these matters over the years. We pride ourselves on delivering and sharing our experience, passion and integrity to your advantage.
For your convenience, our service offering also includes Insolvency Law Lawyers In Alberton, Insolvency Law Lawyers In Randburg, Insolvency Law Lawyers In Sandton, Insolvency Law Lawyers In Roodepoort, Insolvency Law Lawyers In Bedfordview, Insolvency Law Lawyers In Centurion & Insolvency Law Lawyers In Lynnwood Pretoria.
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