MRL3701 DETAILED EXAM NOTES 2021

Contents PART 1 Introduction 1. Introduction PART 2 Obtaining a sequestration order 2. Voluntary surrender 3. Compulsory sequestration PART 3 Effects of sequestration 4. The legal position of the insolvent 5. Vesting of the assests of the insolvent 6. Vesting of the assets of the solvent spouse 7. Uncompleted contracts and legal proceedings not yet finalized PART 4 Collection of the estate assets trustee’s 8. Meetings of creditors and proof claims 9. The election of the trustee trustee 10. Impeachable dispositions PART 5 Realization and distribution of the assets 11. Creditors’ claims and their ranking PART 6 Composition and rehabilitation 12. Composition 13. Rehabilitation PART 7 Miscellaneous 14. Partnership and sequestration PART 8 Downloaded by: bodies | Distribution of this document is illegal S - The study-notes marketplace “The expert in anything was once a beginner” 2 Winding-up of companies and close corporations 15. Winding-up of companies 16. Judicial management and compromise 17. Winding-up of close corporations Downloaded by: bodies | Distribution of this document is illegal S - The study-notes marketplace “The expert in anything was once a beginner” 3 PART 1: INTRODUCTION 1. Introduction Meaning of: “Insolvency” A person is insolvent when his liabilities exceed his assets. Inability to pay debt is, at most, merely evidence of insolvency. A person who has insufficient assets to discharge his liabilities, although satisfying the test of insolvency, is not treated as insolvent for legal purposes unless his estate has been sequestrated by an order of the court. A sequestration order is a formal declaration that a debtor is insolvent, the order is granted either when the debtor voluntarily surrenders or where one or more of the debtor’s creditors apply for compulsory sequestration. The purpose 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. Executing against the property of a debtor who is in insolvent circumstances inevitably results in one or a few creditors being paid, and the rest receiving little or nothing at all. Thus the legal machinery that comes into operation during sequestration is designed to ensure that whatever assets the debtor has are liquidated and distribution among all his creditors in accordance with a predetermined fair order of preference. Once an order of sequestration is granted, a concursus creditorum (coming together of creditors) is established, and the interests of the creditors as a group enjoy preference over the interests of individual creditors. A creditor’s right recover his claim in full by judicial proceedings is replaced with the right, on proving a claim against the insolvent estate, to share with all other proved creditors in the proceeds of the estate assets. Apart from what is permitted by the Act, nothing may be done which would diminish the assets of the estate or prejudice the rights of creditors. The law of insolvency exist primarily for the benefit of the creditors, thus a court will not sequestrate a debtor’s estate unless it’s known that the sequestration will be to the benefit of the creditors. Thus a sequestration order would not be granted if there is only one creditor or if the debtor’s assets are not sufficient to cover the costs of Downloaded by: bodies | Distribution of this document is illegal S - The study-notes marketplace “The expert in anything was once a beginner” 4 sequestration, and so the creditors of the debtor would then have to seek individual relief against the debtor by taking judgment against him for nonpayment of debts. What may be sequestrated? The Act provides for the sequestration of the estate of the debtor. Meaning of “estate” Estates that fall with the meaning of the word “estate” with regard to insolvency:  An estate that includes assets and liabilities  An estate that consists of liabilities only  The joint estate of spouses married in community of property  The separate estates of spouses married out of community of property  The new estate of a debtor whose estate has been sequestrated. Meaning of “debtor” The term “debtor” embraces the following:  A natural person  A partnership  A deceased person  A person incapable of managing his own affairs  An external company that does not fall with the definition of ‘external company’ in the Companies Act. Such as a foreign company which has not established a place of business in the Republic  An entity or association of persons that is not a juristic person, such as a trust Jurisdiction of the court Which court has jurisdict