Contemplating an application for the sequestration of a debtor’s estate in terms of the Insolvency Act?

An application may be launched in the High Court to sequestrate the estate of the insolvent if the creditor has a claim of R 1000 or more against the debtor.

This figure hasn’t been increased for some time since the enactment of the Insolvency Act in 1936. However we can imagine only those persons with substantial claims in today’s values, against a debtor would turn to sequestration proceedings as a means of recovering their debts.

A court will grant an order if there is reason to believe that the sequestration will be to the benefit of the insolvent’s creditor.

The creditor will have to show in his papers before a Judge that the debtor has committed an act of insolvency which gave rise to the application.  The act of insolvency could be among other things:

  1. The debtor leaving the republic.
  2. The debtor not being able to satisfy a judgment where the creditor has taken steps to execute against his property.
  3. The debtor attempting to dispose of his assets to others thereby intending to prejudice you as creditor.
  4. The debtor removing his property and hiding it from attachment.
  5. The debtor making arrangements with creditors to release him wholly of debts.
  6. The debtor publishing a notice to surrender his estate, and withdrawing it or letting it lapse.
  7. The debtor giving notice in writing to any creditor that he is unable to pay any of his debts.

What happens to the insolvent’s property in sequestration proceedings…

Once a sequestration order is granted, the insolvent is divested of his estate which means his estate shall vest in the Master of the High Court UNTIL  a trustee (provisional or final) has been appointed to take charge of his estate.

The insolvent’s estate shall consist of all of the insolvent’s property at the date of sequestration, all property in the hands of the sheriff under a warrant of execution and all property which the insolvent may acquire or which may accrue to him during the sequestration of his estate.

The trustee shall have “vindicatory powers” which means if he establishes that any property or money should fall into the insolvent’s estate, he may pursue that claim and seek to recover what is due to the insolvent.

At common law, Immovable or movable property owned by the insolvent or acquired by him in a foreign jurisdiction does not vest in the trustee.

An exception to this, may arise where the insolvent acquired an inheritance in a foreign country (movable property or cash) and the trustee applies for recognition from the foreign court of that asset in South Africa. In these instances, the trustee would need to show that the insolvent is domiciled in South Africa.

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