An Insolvency Checklist for South Africa
As convenient as it would be, there is no short and concise insolvency checklist for South Africa. However, to help you determine whether you qualify for voluntary sequestration, we look at the checklist for requirements below.
We also look at a checklist to determine if you have committed an act of insolvency that can give a creditor in South Africa the right to apply for the compulsory sequestration of your financial estate.
Thirdly, we look at the preliminary procedures of the voluntary sequestration process in South Africa. The latter can be used as a checklist to determine whether you have met all the formality requirements.
Insolvency Checklist to Determine Whether You Qualify for Voluntary Sequestration in South Africa
To qualify for the voluntary surrendering of your financial estate and thus to be declared bankrupt in South Africa, you must be truly insolvent. The court requires you to submit an affidavit and statement of affairs. The documents help the court to determine whether your liabilities exceed your assets and whether your income is insufficient to pay the debts when due.
Prepare the Following According to The Checklist to Help Determine If You Qualify for Voluntary Sequestration:
- Draft an income and expense statement.
- List all the creditors and the total outstanding debt for each.
- List the monthly payments for each.
- List essential expenses.
- Make a list of all your assets and your estimated value of each.
- Collect the available invoices and receipts for all the assets, debts, and monthly expenses.
- Make a list of immovable properties and state which ones have been paid in full.
- List all shares and get the certificates for such.
- Create a list of the movable assets that are not still under finance.
If the total liabilities exceed the value of the assets, then you qualify as capital insolvent. The next checklist is to determine whether you can pay the debts when due or not. To this end, use the information from the monthly income and expense report to determine whether you have sufficient funds to pay the debts when due or whether you must juggle between accounts to do so.
Keep in mind that all entertainment expenses and luxuries must be removed from the expenses. You can only qualify for voluntary sequestration in South Africa if you are truly insolvent. Luxuries are unnecessary expenses when you need to pay debt. You must be cash-flow and capital insolvent.
Once you have determined that you cannot pay the debts when due even after having cut on luxuries, you can move onto the next requirement. You must be able to prove that the sale of assets on auction will bring sufficient income to pay at least 20 cents out of the rand to each creditor. They must thus be able to receive the minimum benefit.
Assess the value of the assets. Keep in mind that these assets will be sold on auction. If the amount for the sale of the assets is enough to cover the minimum benefits for the creditors, you can move onto the next item on the checklist for insolvency in South Africa.
Is There Enough Money Left to Pay the Sequestration Costs?
The law requires that there must be sufficient income generated from the sale of assets to cover the minimum benefits for the creditors and the sequestration costs. If not, do you have money to pay for the costs? If you also meet this requirement on the insolvency checklist for South Africa, then you qualify for voluntary sequestration. However, we understand that it is difficult to make an objective assessment. As such, we help determine whether you meet the requirements and discuss options to help you make an informed decision.
What if The Assets Are of Sufficient Value to Ensure the Sale Thereof Can Cover the Debts in Full?
In such an instance, we recommend consulting with our attorneys to determine a suitable alternative to sequestration. It is possible to negotiate with the creditors for a settlement amount. Do not start selling assets before you have sought legal guidance as the selling of assets to pay for specific debts to the disadvantage of the other creditors can qualify as an act of insolvency.
Checklist to Determine If You Have Committed an Act of Insolvency in South Africa
Review the instances below. Note that if you have committed any of the following acts, it can be deemed as having committed an act of insolvency:
- Absence from your domicile address or having left South Africa without providing a forwarding address and having stopped payments to creditors.
- Written acknowledgement of a total amount of debt and written acknowledgement that you are unable to pay the debt.
- Written request to a creditor asking to be relieved from a debt because of your inability to pay.
- Failure to satisfy a judgment brought against you by not being able to show that you have sufficient assets to satisfy the judgment.
- Attempting to or having sold assets or disposed of such to pay specific debts without paying the other creditors.
- Failure to pay debts after the sale and transfer of your business.
If you have committed any of the acts, it is already an indication of insolvency. However, this gives a creditor the right to apply for the compulsory sequestration of your estate. It is better to apply for voluntary sequestration than being forced to do so. We strongly recommend seeking legal help from our attorneys in this instance.
Checklist for Meeting Preliminary Formalities
Specific steps must be followed when you apply for voluntary sequestration in South Africa. Fortunately, our attorneys are here to ensure that the preliminary formalities are met. Such include, but are not limited to:
- Notification of the intention to surrender your estate – must be published in the Government Gazette and a relevant newspaper in the area where you reside.
- Publication of the notice of the intention to surrender your estate – must be no less than 14 days before the court hearing date and no longer than 30 days before the said date.
- Notification to the creditors and relevant parties – copies of the notice of intention to surrender your estate must be delivered to the creditors.
- Notices must be delivered to employees and trade unions as relevant.
- The notice of intention to surrender your estate must also be sent to SARS.
- Preparing the statement of affairs.
- Submission of the statement of affairs to the Master of the High Court.
- Lodging of the statement of affairs and supporting documents in duplicate to the Master of the High Court’s office or the relevant Magistrate office in your area.
- Application to court through a notice of motion together with an affidavit.
In Conclusion
Specific time periods apply for publication and serving notices. In addition, specific documents must be handed in along with the statement of affairs. With the application for insolvency in South Africa being a legal process, you need the help of experienced insolvency attorneys. Our team of lawyers will prepare the necessary documents and provide you with comprehensive information to help you make an informed decision.
Although the above-mentioned information provides insight as to the process, it cannot be used as a comprehensive insolvency checklist in South Africa. Rather get in touch for legal guidance if you are in financial trouble to help you determine the best course of action.
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.
