What is insolvency law?

Insolvency law in South Africa is governed by the Insolvency Act of 1936

Insolvency as also the collective term for the process of sequestration, liquidation, voluntary surrender of estate, compulsory sequestration, compulsory liquidation and Rehabilitation

Let’s have a look at all of the separately and also see how the Act regulate these different insolvency law applications

Insolvency law in South Africa is very technical, but we believe in making everything easy. Instead of throwing around legal terms and big word, we strive to educate all our prospective clients with as much as possible information. This way we will ensure that you have all the info you need to make the right decisions.

Look at the terminology below

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insolvency law terminology

The term sequestration is used when the estate of a person is sequestrated (that is, the estate of a
person who is no longer able to pay his or her debts due to uncontrollable circumstances is
surrendered by order of the court). The estate of natural persons, partnerships and trusts can be
sequestrated. Note that the estate of a company or close corporation is not sequestrated but placed
under liquidation.

Voluntary Surrender of Estate is a process whereby an over-indebted individual applies to commit to a repayment term of between 11 and 23 months. Once a final copurt order is granted the applicant will then repay 22c to each rand owed, interest-free, to an a insolvency practitioner (liquidator or curator) of the court. The curator then redistributes the money to the relevant creditors through a PDA (Payment Distribution Agency). Once you have completed your term, all debts will be written off and you can apply to be deemed credit worthy again.

Liquidation entails a company selling a portion of their assets in order to pay their creditors. Voluntary liquidation however is a court application brought in the high court of South Africa

The process is the same as the voluntary surrender of estate BUT a creditor brings the application to the court. This is not an Ex Parte application anymore that the insolvent makes, but ex parte application that a creditor makes to wind up the estate of a person to recover monies owed

The process is the same as the Liquidation BUT a creditor brings the application to the court. This is not an Ex Parte application anymore that the entity makes, but ex parte application that a creditor makes to wind up the estate of a legal entity such as a PTY or a CC to recover monies owed

Rehabilitation is a legal process which happens, in some instances automatically or by order of the High Court of South Africa, whereby the status of the insolvent is uplifted  and put back into a legal position of someone who is / was not declared insolvent.

Rehabilitation can only be done on insolvent estates and NOT on liquidations of legal entities

insolvency law

Please contact us for any questions on insolvency law in South Africa