MRL3701 Final Exam 2025: Previous Year Q&A
on Insolvency Law
, Question 1
1.1 Explain when a formal defect in an application for the sequestration of an insolvent estate will be
considered as fatal
The purpose of a sequestration procedure is for achieving a fair distribution of the available assets among
competing creditors of the debtor therefore a formal defect in an application will only be fatal if the defect
causes an injustice to the creditors or that the prejudice cannot be put right by a court order.
1.2 Explain why the court in Ex Parte Arntzen (Nedbank Ltd as Intervening Creditor) 2013 (1) SA 49 (KZP)
held that creditors are more vulnerable in voluntary surrender applications than in compulsory
sequestration which then gives rise to the requirement of a higher level of disclosure.
This is because sequestration must always be to the advantage of creditors and an application for
voluntary sequestration application must be in terms of the provisions of ss 3 to 6 of the Insolvency Act,
1936 (the Act), on an ex parte basis, this means that it must comply with s6 (1) of the Act which states
that ‘If the court is satisfied ... that the estate of the debtor in question is insolvent, that he owns realisable
property of a sufficient value to defray all costs of the sequestration which will in terms of this Act be
payable out of the free residue of his estate and that it will be to the advantage of creditors of the debtor
if his estate is sequestrated, it may accept the surrender of the debtor’s estate and make an order
sequestrating that estate’
In Ex Parte Arntzen (Nedbank Ltd as Intervening Creditor) 2013 (1) SA 49 (KZP) It was not disputed that
the applicant’s estate was insolvent. The court also considered the other two issues which were left for
determination before the discretion granted by s 6(1) could be exercised. The first was whether the
applicant owned realisable property sufficient to defray all costs of the sequestration. The second, to
determine whether the sequestration of the applicant’s estate would be to the advantage of creditors. In
this case the application was dismissed by Judge Gorven because he was not satisfied with the fact that
the applicant owned realisable property of sufficient value to defray all costs of the sequestration which
will, in terms of the Act, and that the sequestration would not be to the advantage of his creditors.
Therefore, the application was dismissed.
1.3 One of the requirements of the Insolvency Act 24 of 1936 is that one can apply for the
sequestration of an estate if you comply with section 8 of the Act. Explain what section 8 of
this Act refers to and also describe the main purpose that this section of the Act serves .
Section 24 of the Insolvency Act, 1936 deals with the priority of claims and the distribution of the
debtor's assets
It also assists in setting out the order in which different types of claims will be paid from the
debtor's estate. The Act also provides that certain claims to be given priority over others, such as
claims for certain taxes, employees' wages, and secured creditors. This means that certain
creditors are paid before others, based on the importance of their claims.
on Insolvency Law
, Question 1
1.1 Explain when a formal defect in an application for the sequestration of an insolvent estate will be
considered as fatal
The purpose of a sequestration procedure is for achieving a fair distribution of the available assets among
competing creditors of the debtor therefore a formal defect in an application will only be fatal if the defect
causes an injustice to the creditors or that the prejudice cannot be put right by a court order.
1.2 Explain why the court in Ex Parte Arntzen (Nedbank Ltd as Intervening Creditor) 2013 (1) SA 49 (KZP)
held that creditors are more vulnerable in voluntary surrender applications than in compulsory
sequestration which then gives rise to the requirement of a higher level of disclosure.
This is because sequestration must always be to the advantage of creditors and an application for
voluntary sequestration application must be in terms of the provisions of ss 3 to 6 of the Insolvency Act,
1936 (the Act), on an ex parte basis, this means that it must comply with s6 (1) of the Act which states
that ‘If the court is satisfied ... that the estate of the debtor in question is insolvent, that he owns realisable
property of a sufficient value to defray all costs of the sequestration which will in terms of this Act be
payable out of the free residue of his estate and that it will be to the advantage of creditors of the debtor
if his estate is sequestrated, it may accept the surrender of the debtor’s estate and make an order
sequestrating that estate’
In Ex Parte Arntzen (Nedbank Ltd as Intervening Creditor) 2013 (1) SA 49 (KZP) It was not disputed that
the applicant’s estate was insolvent. The court also considered the other two issues which were left for
determination before the discretion granted by s 6(1) could be exercised. The first was whether the
applicant owned realisable property sufficient to defray all costs of the sequestration. The second, to
determine whether the sequestration of the applicant’s estate would be to the advantage of creditors. In
this case the application was dismissed by Judge Gorven because he was not satisfied with the fact that
the applicant owned realisable property of sufficient value to defray all costs of the sequestration which
will, in terms of the Act, and that the sequestration would not be to the advantage of his creditors.
Therefore, the application was dismissed.
1.3 One of the requirements of the Insolvency Act 24 of 1936 is that one can apply for the
sequestration of an estate if you comply with section 8 of the Act. Explain what section 8 of
this Act refers to and also describe the main purpose that this section of the Act serves .
Section 24 of the Insolvency Act, 1936 deals with the priority of claims and the distribution of the
debtor's assets
It also assists in setting out the order in which different types of claims will be paid from the
debtor's estate. The Act also provides that certain claims to be given priority over others, such as
claims for certain taxes, employees' wages, and secured creditors. This means that certain
creditors are paid before others, based on the importance of their claims.
