Law of Insolvency Regarding Notices to Creditors in South Africa
According to the law of insolvency, a debtor’s estate can be sequestrated by means of voluntary surrender or when one or more creditors apply to court for the compulsory sequestration of the debtor’s estate.
Voluntary Sequestration
For the purpose of this article, we look at voluntary surrendering one’s estate according to the law of insolvency requirements in South Africa.
The debtor applies to court to be sequestrated, and part of this process entails giving control over their financial estate to a court-appointed curator or trustee. The court only accepts the surrendering of the estate if the debtor is able to prove that his/her liabilities exceed their assets and that he/she is unable to pay the debts. The court, according to the requirements of the law of insolvency, must find the debtor to be truly insolvent and must find that the voluntary sequestration would be to the benefit of the creditors.
Who Can Apply for Estate Surrendering?
The debtor must be a natural person. His/her agent can apply on their behalf, if so instructed. An executor of the estate of a deceased debtor can also apply. Other instances include:
- The administrator of the estate of a debtor, incapable of managing their financial affairs, can apply.
- Both spouses, if married in community of property can apply to have their mutual estate surrendered.
- Members of a partnership or their agents can apply for the surrendering of their estate.
Three Requirements for The Approval of The Surrendering of An Estate
Three requirements must be met before the court can accept the estate surrendering. The first is that the estate of the applicant must be insolvent. The second entails that the voluntary sequestration must be to the benefit of the creditors, and the third entails that the estate of the debtor must have sufficient assets to ensure the sale thereof on auction can realise enough funds for the payment of the sequestration, legal costs, and minimum benefit to the creditors.
If all the requirements are met, the court considers whether the formality requirements have been met. This means the correct procedures must be followed in notifying creditors, applying to court, and adhering to the requirements of the law of insolvency in South Africa.
Notices to Creditors – Formal Requirements to Meet
The debtor must place a notice of the intention to voluntary sequestrate in the Government Gazette, in addition to a newspaper published and distributed in the area in which he/she resides (magisterial district where the court has jurisdiction). The notice must include the full names and address, as well as occupation of the debtor in addition to the date that the application will be made to the High Court and the place and time where the debtor’s statement affairs will be for inspection.
The debtor must have proof of the publication of the notices. Keep in mind that the notices must be in a language that can be understood by the creditors and the publication must be in a newspaper, which circulates in the area where the creditors reside if the debtor has moved.
The notices must be published no more than 30 days before the hearing date for the application and not less than 14 days before the application hearing date, according to the requirements of the law of insolvency in South Africa. It is important to adhere to the time limits to ensure creditors get sufficient time to oppose the application and to inspect the affidavit. However, the debtor cannot publish the notices more than 30 days before the application hearing since this would keep creditors from exercising their rights to legal action against a debtor in order to recover debts owed. Failure to the meet the time limits imposed by the law of insolvency can mean failure of the application.
Publication of the notices is not enough. The debtor must, within seven days from publishing, provide the creditors with copies of the notices. This includes all creditors of which the addresses are known. Employees are also creditors.
Where to Get Help
Get in touch with our attorneys who are specialising in the law of insolvency, to help you apply for voluntary sequestration and ensure compliance with all the formalities.
Disclaimer: This article is for information purposes only and does not constitute legal advice. Call on our attorneys for legal advice, rather than relying on the information herein to make any decisions. The information is relevant to the date of publishing.
