Sequestration entails the surrendering of the natural person’s estate, whereby the person applies to court to be declared insolvent. An insolvent person’s estate is sequestrated in terms of the provisions of the Insolvency Act 24 of 1936 (hereinafter “the Act”).
According to the Corporate Finance Institute (2020), insolvency refers to a state of financial distress, whereby an individual’s is unable to settle his/her outstanding debts. A person will not be declared insolvent if he/she is merely unable settle outstanding debt – the individual must be unable to cover his or her outstanding debt after all his/her assets have been sold.
A sequestration order can either be obtained where the individual voluntarily applies for the order, or alternatively, if the individual’s creditors apply.