Monthly Archives: June 2015

Differences between liquidation and sequestration process

A3_bThe application for liquidation and sequestration processes are often confused. Many people think that the processes are the same. However, there is a big difference between these two processes.

A simple way to describe liquidation is that liquidation is the winding up of a firm by selling off its free (un-pledged) assets to convert them into cash to pay the firm’s unsecured creditors. Before a liquidation application can be issued in court, a founding affidavit needs to be drafted. This affidavit will include all the details of the Applicant and / or Respondent. The Applicant is the person who wants to liquidate the company and the Respondent is the company. In the case where the Applicant is the company, there will be no Respondent. The affidavit will also include any details of the company, employees and creditors. A bond of security also needs to be signed for the purpose of the Master of the High Court.

Once the application is issued, the only people who receive this notice is the South African Revenue Services (SARS), the Master of the High Court, employees of the company and any trade unions. As soon as this is done, a Master’s certificate is obtained verifying the application, and a provisional liquidation order is granted.  A return date is then set, and all creditors are notified of the provisional liquidation through registered post and by placing the provisional order in two local newspapers. Should the Applicant’s attorneys receive no notice of intention to defend the matter, a final liquidation order is granted. The order together with the application is sent to the Master of the High Court and a liquidator will be appointed.

Sequestration is the preferred option for the individual who has exhausted all other options of resolution, and is now in a position where even if all their assets are sold, they would be left with such a high shortfall that it would be unreasonable to expect them to recover from this loss. A sequestration involves a little more administration work before a court date can be obtained. Before the Notice of Motion and Founding Affidavit are drafted, a valuer needs to be appointed in order to value the Applicant or Respondent’s estate. This needs to be done in order to ascertain whether the debtor is indeed over-indebted, and whether he / she has enough assets to provide a benefit for all creditors involved.

In the matter of a voluntary sequestration, the Applicant will be the party whose estate is to be sequestrated. The valuer needs to value the property of the Applicant on a forced sale scale. This will be calculated by subtracting 20% of the actual value of the property.

As soon as the valuer has made an estimate for the Applicant / Respondent’s estate, a Statement of Debtor’s Affairs needs to be handed in to the Master of the High Court for inspection by all creditors. This needs to be done no less than 14 or more than 30 days before the court date. A Notice of Surrender needs to be sent through registered post to all creditors to inform them that the Statement of Debtor’s Affairs is available for inspection.

The Notice of Surrender needs to be posted in two local newspapers and the Government Gazette no less than 14, or more than 30 days before the court date. Once all of the above-mentioned requirement has been adhered to, the notice of surrender can be annexed to the Founding Affidavit and can be heard by the court, no Bond of Security is needed at this point. A sequestration can only be heard by the High Court, whereas a liquidation can be heard either by a Magistrate’s Court or by the High Court, depending on the merits of the case.

This article is a general information sheet and should not be used or relied on as legal or other professional advice. No liability can be accepted for any errors or omissions nor for any loss or damage arising from reliance upon any information herein. Always contact your legal adviser for specific and detailed advice

Die sekwestrasieproses

A2_bDie sekwestrasieproses behels ‘n hofaansoek. Die Applikant in die aansoek is óf jyself vir jou eie sekwestrasie (vrywillige boedeloorgawe) óf die Applikant is ‘n skuldeiser van jou (‘n vriendelike of aggressiewe skuldeiser). Die aansoeke is feitlik dieselfde en alhoewel daar verskillende vereistes vir elk is, is die effek dieselfde.

Vrywillige boedeloorgawe

Dit verwys na die proses wanneer ‘n natuurlike persoon ‘n aansoek bring om hom/haarself onder sekwestrasie te laat plaas.

‘n Persoon is insolvent as sy/haar laste sy/haar bates oorskry, en dan kan hul aansoek doen vir ‘n vrywillige oorgawe van sy/haar boedel. Enigiemand kan op enige stadium sodra hy/sy insolvent is, aansoek doen vir ‘n vrywillige oorgawe, selfs al is hulle byvoorbeeld onder skuldberading.

Die persoon wat aansoek wil doen om hom/haarself te sekwestreer, sal ‘n beëdigde verklaring moet aflê wat verduidelik waarom hy/sy beweer hy/sy is insolvent. Dit sal opgestel word deur die prokureurs wat die aansoek namens die Applikant sal bring. Sodra die beëdigde verklaring geteken is, sal die aansoek deur die Hof uitgereik word en ‘n hofdatum sal gegee word. Die Applikant hoef nie in die Hof te verskyn nie,  want die prokureur verskyn namens hom/haar.

Indien die Hof ‘n bevel toestaan op die eerste hofdatum, sal dit ‘n voorlopige bevel wees en die saak sal uitgestel word vir ongeveer ‘n maand. Gedurende die maand sal kennisgewing aan alle krediteure gegee word en indien niemand teen die keerdatum die aansoek teengestaan het nie, sal die bevel gefinaliseer word en die persoon sal gesekwestreer word.

Verpligte sekwestrasie

Verpligte sekwestrasie behels ook ‘n hofaansoek, maar die Applikant moet ‘n skuldeiser van die skuldenaar wees. As dit ‘n skuldeiser is wat nie ‘n goeie verhouding met die skuldenaar het nie, verwys ons daarna as ‘n “aggressiewe” sekwestrasie (byvoorbeeld die bank).

Die banke bring selde sekwestrasie aansoeke teen die gewone skuldenaar, omdat dit baie goedkoper en makliker is vir hulle om die invorderingsprosedures te volg: lê beslag op eiendom en verkoop dit en/of lê beslag op jou salaris.

As dit ‘n skuldeiser is wat ‘n goeie verhouding het met die skuldenaar, verwys ons daarna as ‘n “vriendelike” sekwestrasie (byvoorbeeld ‘n familielid of ‘n vriend aan wie jy geld skuld).

Aggressiewe (“onvriendelike”) sekwestrasie

Waar ‘n onvriendelike skuldeiser ‘n sekwestrasie aansoek bring teen ‘n skuldenaar, verwys ons daarna as ‘n aggressiewe sekwestrasie, maar dit is steeds ‘n gedwonge sekwestrasie, in teenstelling met vrywillige boedeloorgawe.

Die skuldeiser wat die aansoek bring, moet ‘n eis teen die skuldenaar bewys; met ander woorde, die skuldenaar moet inderdaad geld aan die skuldeiser verskuldig wees. ‘n Tweede vereiste is dat daar ook ‘n voordeel vir krediteure moet wees. Derdens moes die skuldenaar ‘n daad van insolvensie gepleeg het.

As ‘n skuldeiser ‘n aggressiewe aansoek bring teen ‘n skuldenaar, kan die skuldenaar die aansoek teenstaan indien hy/sy nie insolvent is nie, of as daar ‘n ander rede is waarom die bevel nie toegestaan moet word nie.

Proses vir “onvriendelike” en “vriendelike” sekwestrasies

Die proses vir beide hierdie aansoeke is dieselfde, net die Applikant verskil.

Soos met vrywillige oorgawe, moet ‘n beëdigde verklaring deur die skuldeiser geteken word om te verduidelik waarom hy beweer dat die skuldenaar hom/haar geld skuld. Hy sal ook bewyse daarvan moet gee (kontrak/verklaring), asook  bewyse dat die skuldenaar ‘n daad van insolvensie gepleeg het (bv. waar die skuldenaar ‘n brief geskryf het om te sê dat hy/sy nie die skuld kan betaal nie). In beide gevalle moet die Applikant bewys dat daar ‘n voordeel vir krediteure sal wees as die skuldenaar gesekwestreer word.

Sodra die verklaring onderteken is, sal die nodige dokumentasie opgestel word, deur die Hof uitgereik word en ‘n hofdatum verkry word. Sodra dit gedoen is, sal die dokumente op die skuldenaar, werknemers van die skuldenaar, Meester van die Hooggeregshof en die Suid-Afrikaanse Inkomstediens beteken word deur die Balju. Die voorlopige bevel moet ook by wyse van geregistreerde pos aan alle skuldeisers bo R5 000.00 gegee word. Indien die aansoek nie teengestaan word nie, sal ‘n finale bevel gemaak moet word vir sekwestrasie van die skuldenaar/Applikant.

Hierdie artikel is ‘n algemene inligtingstuk en moet nie gebruik of staatgemaak word op as professionele advies nie. Geen aanspreeklikheid kan aanvaar word vir enige foute of weglatings of vir enige verlies of skade wat voortspruit uit vertroue op enige inligting hierin nie. Kontak atyd jou regsadviseur vir spesifieke en gedetailleerde advies.

How to manage your debt

A1_bAlecia had big financial problems; she had too much debt and her expenses outweighed her income. She decided to open a new bank account into which her salary could be paid, which would ensure that she could manage her salary before her monthly debit orders went off.

Alecia thought it would be a good idea to pay her small debts off first and then begin with the larger debt. Unfortunately this resulted in her not making any payments at all on her home loan and credit card and the bank threatened to blacklist her and sent her a summons. The bank then made an application in court for an order that made it compulsory for her to pay the amount which the bank set out; this order is called an Emoluments Attachment Order (EAO) or garnishee order. An EAO is granted in terms of s. 65J of the Magistrates’ Courts Act 32 of 1944 and orders an employer (referred to as a garnishee) to make deductions from a debtor’s salary or wages and pay these over to the creditor or its attorneys. This amount was much greater than Alecia could afford and left her with no income for the rest of her monthly debt payments. She was thus put in a worse financial position than before.

If Alecia had known about debt counselling sooner she would not be stuck in the position she is now facing. It is important to educate people about debt counselling, especially in a country where debt is granted so easily and yet so hard to pay back. Debt counselling is a process of assisting consumers that are experiencing debt-related problems and are having difficulty making their current monthly payments, by providing budget advice, restructuring their payments, negotiating on their behalf with credit providers, monitoring their payments and providing aftercare services.

It is the duty of the Debt Counsellor [who is registered with the National Credit Regulator (NCR)] to assess whether the consumer is over-indebted by weighing the income and expenses and then taking into account statutory and non-statutory deductions as well as existing monthly debt payments. If the calculation results in a negative balance, the consumer is declared over-indebted. The debt counsellor provides a proposal that lowers the debt payments and increases the cascades (the number of months allowed for repayment of the debt, inclusive of interest), in order for the consumer to be able to manage his debt while paying it off at the same time. An order is then granted in court and sent to the credit providers, and the consumer can no longer incur any new debt. Once the debt is paid off, the consumer is given a clearance certificate and he/she has all that extra income to buy goods in cash.

Unfortunately, it was too late for Alecia as legal action was already taken against her. The same applies if a termination letter is sent in terms of s.129 of the National Credit Act. It is important for people to know that there is a way to manage their debt, but they need to acknowledge that they are in financial trouble before they are placed in a situation like Alecia. It may be too late for Alecia, but hopefully it won’t be too late for others.

This article is a general information sheet and should not be used or relied on as legal or other professional advice. No liability can be accepted for any errors or omissions nor for any loss or damage arising from reliance upon any information herein. Always contact your legal adviser for specific and detailed advice