Rehabilitation

Question 1

Statutory compensation:

Answer 1

-The insolvent may make an offer of composition to their trustee at any stage after the first meeting of the creditors

Trustee will consider the offer:
-The trustee needs to believe the offer would be accepted

Provisions:
- May not contain a provision that would confer an advantage to a creditor
- Provision where composition is dependent on rehabilitation – of no effect.

Acceptance:
- Must be accepted by a 75% majority in number and value of all the creditors who have proved their claims.
- Decision must be taken in good faith to be Valid.

Effect:
- All creditors are bound by the composition (even those who have not proved their claims)
- Provision that the assets of the insolvent must be returned to them? Must give effect to that provision.
- Solvent spouse will also receive their assets back.
- Trustee must draft a liquidation and distribution accounts (S 123(2))
- Insolvent may apply for rehabilitation.

Question 2

Conditions for rehabilitation:

Answer 2

Automatic rehabilitation:
1. 10 years after sequestration
2. Unless court deems otherwise

Early Rehabilitation:
1. Compensation of creditors is more than 50cent to the rand
2. No claim after 6 months of sequestration
3. Full settlement of all proven claims
4. Lapse of certain statutory prescribed periods
-12 months lapsed from date of confirmation
-Estate sequestrated previously =3 years
Convicted of any fraudulent act i.r.o insolvency or in contravention of S 132, 132, or 134 =5 years

Question 3

Consequences:

Answer 3

1. Insolvency comes to an end
2. Contracting capacity restored
3. S 129(1): All disabilities are lifted, and all pre-sequestration debts extinguished- except fraud
4. Does NOT get estate back, unless:
   
   • Composition provides therefore
   • Rehabilitation based on: No claims
     were proven within 6 months