Rose

1. Rose now approaches you for advice.
Explain to Rose the Acts of insolvency as

indicated in the act of 24 of 1936. Enlighten Rose which act of insolvency applies
to her.
A debtor is defined in the common meaning to include a person and a partnership but
excludes any people who may be put in liquidation under the laws governing
corporations. When a debtor's estate is placed under sequestration, the debtor is
considered insolvent.
The first act of bankruptcy occurs when a debtor flees the country or his place of
residence, or remains outside the country, with the goal of evading or delaying payment
of his obligation. Because it is a subjective requirement, proving the debtor's purpose
may be challenging.
The second act of insolvency is defined by three conditions, only one of which must be
met in order for the conduct to be considered an act of insolvency to occur. A debtor fails
to comply with the first of these criteria when a court has granted judgment against him
and the debtor has failed to pay the debt; secondly when the debtor fails to indicate to
the sheriff disposable movable property sufficient to satisfy the order; and thirdly when it
appears from the sheriff's report that he has not discovered sufficient disposable assets
to satisfy the judgment.
The third act of bankruptcy has to do with the debtor's assets and possessions. Any
disposition of the debtor's property that has or would have the effect of prejudicing their
creditors, or that has the effect of favoring one creditor over another, would be
considered an act of insolvency by the court. Creditors, on the other hand, may not
always have intimate knowledge of a debtor's situation and behavior, making it harder to
substantiate this act.
The debtor commits the fourth act of bankruptcy when he takes or seeks to remove any
of his property with the goal of prejudicing his creditors or favoring one creditor over
another. This act of insolvency may be difficult to show for the same reasons as those
mentioned above. Furthermore, the test for intent is a subjective one, which makes it
more difficult to meet the burden of evidence.
The debtor commits the fifth act of bankruptcy when he or she makes or promises to
make any agreement with any of his or her creditors with the purpose of freeing him or
her totally or partly from his or her obligations. If the creditors are not aware of each
other's existence, it may be difficult to substantiate their claims.
The sixth act of bankruptcy happens after a debtor has issued a notice for the surrender
of his insolvent estate, which has not expired or been withdrawn.
The debtor's seventh act of bankruptcy is the delivery of a written notice to any of his
creditors, alerting them that he is unable to pay part or all of his obligations.
When a debtor, such as a merchant, delivers notice of insolvency, this is the eighth act
of bankruptcy. By simply asking the debtor to settle his obligation once you have
received and read the notice that was published in the Government Gazette, you may be
able to detect this act of bankruptcy rather easily.
2. Differentiate between liquidation and sequestration.

When a company goes into liquidation, it sells off its free assets in order to turn them into
cash, which is then used to pay the company's unsecured creditors.
If an individual has exhausted all other options for resolving their financial difficulties and
is now in a position where even if all of their assets were sold, they would still be left with
a significant shortfall, it would be unreasonable to expect that they would recover from
this loss, sequestration is the preferred option.
3. Differentiate between voluntary sequestration and compulsory sequestration.

Compulsory sequestration happens when a creditor asks the court to declare the debtor
bankrupt and remove the debtor's estate from him or her in order to satisfy the creditor's
claim, while voluntary sequestration occurs when the debtor contacts the court without
being compelled to do so.
4. Advise Rose of the effects of Sequestration on:

1 Incomplete contract.
It is fairly uncommon for contracts entered into before to the sequestration of a person's
estate to be terminated as a result of the sequestration.
2 Employment contracts
Severance pay is available to employees whose employment contracts have been
ended as a result of sequestration or liquidation and who are able to prove their
entitlement to such compensation from the bankrupt estate.
3 Instalment transactions
Immediately after a person's insolvency, the creditors of the bankrupt individual must be
safeguarded. As a result, the bankrupt is unable to engage in some contracts, but his or
her options are not fully limited.
5. Explain rehabilitation to Rose.

Restoration of the company to a state of successful operation and solvency if it can
demonstrate that its continued operation is economically possible and that its creditors
can recoup their losses through the use of the predicted future cash flows outlined in the
plan.
Step-by-step explanation
There is a strong emphasis on creditor rights under insolvency law. In addition, it is
argued that the primary purpose of the sequestration process is to guarantee that
creditors get a benefit and that their interests are safeguarded. In fact, the debtor suffers
a bad outcome as a result of the sequestration process. It is said that since the
necessity of benefit of creditors is a condition for the sequestration of a debtor's assets,
impoverished or disadvantaged debtors are unable to secure sequestration orders
against their creditors.
Rose now approaches you for advice. Explain to Rose the Acts of insolvency as
indicated in the Insolvency act of 24 of 1936.Enlighten Rose which act of
insolvency applies to her.
The Insolvency Act 24 of 1936 governs the administration of a debtor's estate when it is
sequestered for the benefit of creditors.
The debtor must demonstrate that sequestration will benefit creditors, which poses a
roadblock for the debtor when filing for voluntary surrender of his estate.
Insolvency refers to situations in which a debtor is unable to repay her debts. For
instance, Rose will become insolvent because she is unable to repay its creditors money
owed on time, often leading to a bankruptcy filing.
Differentiate between liquidation and sequestration.
The phrase "liquidation" refers to the bankruptcy of a company or close corporation and
certain other legal organizations. "
The phrase "sequestration"refers to the insolvency of a natural person or a trust.
Liquidation is the winding up of a firm by selling off its free (un-pledged) assets to turn
them into cash to pay the firm's unsecured creditors. Before a liquidation application may
be issued in court, a founding affidavit needs to be drafted. This affidavit will cover all the
details of the Applicant and / or Respondent. The Applicant is the person who seeks to
liquidate the company and the Respondent is the company. In the instance where the
Applicant is the firm, there will be no Respondent. The affidavit will also include any data
about the company, employees and creditors. A bond of security also needs to be
signed for the purpose of the Master of the High Court.
Sequestration is the preferable alternative for the individual who has tried all other
avenues of settlement, and is now in a position where even if all their assets are sold,
they would be left with such a huge shortfall that it would be ridiculous to expect them to
recoup from this loss. A sequestration involves a bit more administration work before a
court date can be acquired.
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 identify whether the debtor is genuinely over-indebted, and whether he / she
has adequate assets to provide a benefit for all creditors involved.
Differentiate between voluntary sequestration and compulsory sequestration.
Voluntary sequestration is a legal process in which an individual petitions for the

surrender of their financial assets and declaration of bankruptcy. Even prior to voluntary
sequestration, a debtor can attempt to resolve his or her debt repayment concerns.
Compulsory Sequestration similarly requires a court application, but the Applicant is the
debtor's creditor. If the debtor has a strained relationship with a creditor, we refer to this
as a "aggressive" sequestration (for example the bank).
Banks, on the other hand, rarely launch sequestration proceedings against the average
debtor, as it is far more cost effective and convenient for them to follow the collection
procedures: - attach property and sell it, as well as attach your salary.
If the debtor has a good relationship with the creditor, we regard to this as a "friendly"
sequestration (for example, a family member or a friend to whom you owe money).
Advise Rose of the effects of Sequestration on:
4.1 Incomplete contracts
The effect that sequestration has on an uncompleted contract (general) is that because
the insolvent estate vests in the trustee, he steps into the shoes of the insolvent and
must decide whether to comply in terms of the contract or not (see Bryant & Flanagan
(Pty)Ltd v Muller). This means that the trustee has the decision to deliver specified
performance (as stipulated in the contract whatever it may be) or not. He will make this
decision depending on whether it will benefit the overall body of creditors.
[Performing in terms of the contract = specified performance]
4.2 Employment contracts

An employee who has suffered a loss as a result of a suspended or terminated contract
may seek compensation from the employer's insolvent estate. Additionally, an employee
whose employment contract is ended as a result of sequestration or liquidation may
recover severance pay from the bankrupt estate.
4.3 Instalment transactions

"installment transaction" refers to a way of selling products on credit in which the seller
receives a portion of the purchase price at the time the goods are delivered and the
remainder via installment payments over a specified term. One of the purposes of
Sequestration is to benefit your creditors through collective debt collection process that
will ensure an orderly and fair distribution of the debtor's assets in circumstances where
these assets are insufficient to satisfy all the creditor's claims .
Explain rehabilitation to Rose.

When an individual becomes bankrupt and his estate is subsequently sequestered,
rehabilitation is required. rehabilitation is thus the process (whether automatic or
imposed by a court) by which an individual is released from his insolvent status.

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1. Rose now approaches you for advice.

Explain to Rose the Acts of insolvency as

2. Differentiate between liquidation and sequestration.

3. Differentiate between voluntary sequestration and compulsory sequestration.

4. Advise Rose of the effects of Sequestration on:

5. Explain rehabilitation to Rose.

Differentiate between liquidation and sequestration.

Differentiate between voluntary sequestration and compulsory sequestration.

Voluntary sequestration is a legal process in which an individual petitions for the

Advise Rose of the effects of Sequestration on:

4.1 Incomplete contracts

4.2 Employment contracts

4.3 Instalment transactions

Explain rehabilitation to Rose.

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