A Closer Look at Sequestration Laws
Where an individual or trust faces difficulty settling outstanding debt, they may consider applying for the sequestration of their estate as one of the available options for becoming debt-free. Sequestration is governed by the Insolvency Act 24 of 1936. Insolvent individuals are sequestrated, whereas the process of liquidation applies to corporate entities such as Companies and other juristic persons.
Voluntary sequestration occurs when the debtor initiates the application, instructing their attorney to surrender their estate to the Master of the High Court. Upon approval, the Master of the High Court appoints a curator or trustee to assume control over the surrendered estate. Involuntary sequestration occurs when one or more of the debtor’s creditors apply to sequestrate the individual’s or trust’s estate.
Jurisdiction for these applications lies with the High Court, which means that an attorney will have to engage the services of an advocate to handle Court proceedings. Even though there are numerous ‘debt advisors’ or ‘debt relief agents’ advertising their services to assist debtors to sequestrate, only qualified attorneys registered with the Legal Practice Council are authorised to manage these applications.
Voluntary Sequestration
In the case of voluntary sequestration, a Notice of Surrender is published in the Government Gazette and a local newspaper circulating in the district where the party wanting to sequestrate resides. Publication of the Notice of Surrender serves to halt any further legal actions by creditors against the sequestrated party.
A Statement of Debtor’s Affairs is prepared and submitted to the Master of the High Court for a 14-day inspection period.
Registered letters are subsequently dispatched to all creditors, notifying them of the estate’s surrender. Creditors can then obtain any information needed from the attorney handling the matter.
The South African Revenue Services (SARS) must be formally informed and registered taxpayers are required to apply for a new tax number which will apply to the new estate that is being established.
An advocate is briefed to represent the applicant in the High Court and present the application for surrender. The applicant is not required to appear in person. The Court may approve the surrender if the procedural steps are correctly adhered to, the applicant’s estate is genuinely insolvent, granting the application will benefit the creditors, and there is adequate property to cover the sequestration costs.
Compulsory Sequestration
This process is typically initiated by a creditor who is owed money and is unable to recover it through the usual means. The process begins with the issuance of a Notice of Motion, with a supporting affidavit that the liquidity or realistic value of a debtor’s estate, among other factors, is insufficient to cover their immediate debts. A provisional order is issued if the creditor’s application is successful.
Should the individual or trust fail to provide adequate justification or if certain additional formal requirements are met, the legal process advances. If it is determined that sequestrating the debtor would indeed be advantageous to the creditors, and all legal criteria are satisfied, the Court issues a Final Order. This Final Order formalises the sequestration, allowing for the appointed curator or trustee to assume control over the financial affairs of the sequestrated estate.
Consult with Insolvency Professionals
The decision to sequestrate is a complex one and the process has strict formal requirements many of which are time sensitive. Several important decisions must be made from the beginning of, and throughout, the process that can significantly improve or worsen the end result for the insolvent.
If you are struggling with a mountain of debt and your creditors are hounding you for money, contact Francois Uys Inc. Attorneys and let us assist you in reaching the best possible outcome. We will guide you through the formalities and represent you in critical consultations with the curator where several strategic decisions need to be made. We have over 33 years of experience assisting clients to resolve debt problems and thousands of satisfied clients. Make an appointment with one of our experienced attorneys today and start your journey to becoming debt-free.
Disclaimer: This article is for information purposes only. It does not constitute legal advice and cannot be used to make any decisions. For advice on the topic of debt and sequestration, contact Francois Uys Inc. The information is relevant as of the date of publishing.
