1. insolvency

2. insolvency When liabilities exceed assets
Only legally insolvent when sequestrated by order of court

3. sequestration
A sequestration order is a formal declaration that a debtor is insolvent. The order is granted at the request of the debtor himself (voluntary) or at the request of one or more of his creditors (compulsory).

4. Purpose of sequestration
The main purpose of a sequestration order is to ensure the orderly and equitable distribution of a debtors assets where they are insufficient to meet the claims of all his creditors.

5. Voluntary sequestration
Requirements:
The insolvent must comply with the prescribed formalities. These formalities pertain mainly to notification of creditors and other interested parties. The purpose of this is to enable the creditors to object to the application.
The debtor has to prove that he is in fact insolvent.
The surrender must be to the advantage of the creditors.
There must be sufficient assets to cover the costs of sequestration.

6. Compulsory
Brought by a creditor with a liquidated claim of at least R100
Creditor must prove:
He has established a claim that entitles him to apply for the sequestration of the debtors estate
The debtor has committed an act of insolvency or is insolvent
There is reason to believe that sequestration will be to the advantage to the creditor.

7. Acts of insolvency
The debtor leaves the Republic or is absent from the Republic or departs from his house with the intention to evade or delay payment of his debts.
Failure to satisfy judgment. If a court has given judgment against him, and he fails to satisfy the judgment due to insufficient property.
If the insolvent makes, or attempts making any disposition of any of his property which has, or would have, the effect of prejudicing his creditors or of preferring one creditor above another.

8. Acts of insolvency
If he removes, or attempts to remove, any of his property with an intention to prejudice his creditors or to prefer one creditor above another.
If the insolvent makes, or offers to make, any arrangements with any of his creditors to release him wholly or in part from his debts.
Failure to apply for surrender. If after having published a notice of surrender of his estate which has not yet lapsed or been withdrawn, fails to submit a substantively correct and complete statement of affairs with the Master, or fails to apply for acceptance of the surrender of the estate on the date indicated by the notice

9. Acts of insolvency
Notice of inability to pay. If the debtor gives notice in writing to any one of his creditors that he is unable to pay any of his debts.
Inability to pay debts after notice of transfer of business. If, being a trader, he gives notice in the Gazette of his intention to transfer his business and is therefore unable to pay all of his debts.

10. Effect of sequestration on property
The sequestration of a person’s estate causes the insolvent estate to vest in the Master of the High Court and then in the trustee as soon as one is appointed to him. However, clothes, bedding and other essential means of substance remain in the hands of the insolvent.
Remuneration for work done by him after sequestration, pension monies, compensation for damages suffered by him in his personal capacity, mean damages as a result of bodily injury or infringement of his personality.

11. Effects of sequestration
All civil proceedings stayed until trustee appointed
May not serve as director
Contracts – trustee to decide

12. Voidable dispositions
Trustee can set aside if liabilities exceed assets afterwards
Not for value
Prefer one creditor over another
Undue preference – intended to prefer one creditor
Voidable preference – if within 6 months of insolvency

13. Creditors meetings
First meeting – prove claims, elect trustee, interrogate
2nd meeting – prove claims, interrogate, trustee reports back, creditors instruct
Additional meetings as necessary

14. Submitting of claims On affidavit with supporting documents
Only proven claims can share in proceeds
Danger of contribution

15. distribution Secured creditors – mortgage, pawn, lien
Preferred creditors – notarial bond, tax, wages etc
Concurrent – share in free residue