Understanding the Role of Insolvency Practitioners in South Africa

Insolvency practitioners in South Africa assist clients with voluntary sequestration liquidation applications. They also assist clients who are forced by creditors to sequestrate or to liquidate. In addition, they assist clients who want to bring compulsory sequestration or liquidation applications against debtors. To understand, how insolvency practitioners can help you, we first need to look at the difference between sequestration and liquidation.

Sequestration is the term used when a natural person, deceased estate, joint estate of a married couple, a partnership, or a trust is declared bankrupt by the court. A voluntary sequestration is where one applies to court to be sequestrated, whereas a compulsory sequestration is where a creditor applies to court to have a debtor sequestrated. Liquidation refers to the process whereby the court declares a non-natural person, such as a company or close corporation, as bankrupt. It can be a voluntary liquidation, or compulsory, as brought by creditors.

A person is insolvent when their debt and liabilities far exceed their assets and they are unable to pay the debt. A company or close corporation is insolvent the moment its liabilities exceed its assets. However, to get the formal status of “insolvent” or “bankrupt”, a court application is made where the entity’s estate is surrendered. The assets in the estate are sold on an auction. The court appoints a curator or trustee to manage the sale of the assets and to distribute the benefits to the creditors.

To be declared insolvent as a natural person, you will need the help of insolvency practitioners in South Africa. They will handle the application on your behalf. Your liabilities must exceed your assets and the sequestration must be to the benefit of the creditors. The sale of the assets must be sufficient to pay for the costs of the sequestration. For a company’s liquidation, you will also need assistance from insolvency practitioners in South Africa, since it entails a court application. For voluntary liquidation, the company’s liabilities must exceed its assets and there must be sufficient residual value from the sale of assets to pay for the cost of liquidation.

Benefit for creditors is a complex topic. In simpler terms, it means that you must be able to prove that the creditors are not prejudiced by your sequestration. The issue, however, is best discussed with our experienced insolvency practitioners in South Africa because, since a court decision in 2010, many judges follow the decision that there must be 20 cents out of the rand to the benefit of the creditors. It is, however, more complex than that, since some of the judges apply the traditional ruling of ten cents out of the rand for concurrent creditors.

Our experienced insolvency practitioners in South Africa will discuss the calculation of benefit to the creditors in detail at your first appointment. You will not have to appear in court, as our attorneys will handle the application on your behalf for voluntary sequestration or liquidation.

Make an informed decision about the best way to solve your debt problem. Speak to our team of insolvency practitioners in South Africa.


Disclaimer: Information is relevant to the date of publishing and is not intended as any form of legal advice. Please call on our attorneys for legal guidance rather than relying on the information herein to make decisions – October 2017.

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