STUDY UNIT 11 Flashcards

1
Q

Discuss composition

A
  • insolvent avoids sequestration by entering into compromise with creditors
  • two forms of compromise = common law compromise and statutory compromise
How well did you know this?
1
Not at all
2
3
4
5
Perfectly
2
Q

Define common law compromise and discuss its conditions and advantages

A
  • written contract to pay dividends on creditor’s claims
  • on the condition that trustee gets released of debt and the provisional order of sequestration gets discharged
  • all creditor’s must agree in order for this to take place
  • this compromise puts the insolvent and the creditor in better positions
  • creditors will get higher dividends and paid earlier
  • insolvent does not have to be sequestrated and face the consequences
How well did you know this?
1
Not at all
2
3
4
5
Perfectly
3
Q

Discuss statutory compromise

A
  • Section 119 = majority vote of creditors bind minority of creditors
  • 75% must approve
  • basically creditors vote determines what will happen
  • insolvent is still unrehabilitated and has the disadvantages thereof
  • insolvent can however apply for early rehabilitation
How well did you know this?
1
Not at all
2
3
4
5
Perfectly
4
Q

What is the procedure for statutory compromise

A

1) submission of offer - trustee may submit offer of insolvent anytime after first meeting; trustee may also refuse to accept then the insolvent may apply to the Master
2) meeting - meeting must take place 14-28 days after offer is made

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
5
Q

Limitations and conditions regarding compromise

A
  • restrictions are impose by the insolvency act
    1) promise of security - if offer contains promise of security, nature of security needs to be specified
    2) entitling another creditor - prejudice another creditor for benefits they would have received if insolvent was seq.
    3) condition of rehab - has no effect, may be no condition in offer made, need to act as if insolvent will be seq.
  • Zuluman and other v Scholtz
How well did you know this?
1
Not at all
2
3
4
5
Perfectly
6
Q

Name the consequences of accepting composition

A

1) all concurrent creditors are bound
2) trustee has to frame accounts, administer composition and report to creditors
3) restoration of property of insolvent - no transfer/delivery; revesting takes place
4) restoration to solvent spouse - not binding on solvent spouse’s creditors
5) right to prompt rehab

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
7
Q

When can a offer(composition) be criminal

A
  • when one accepts a benefit as a consideration for the agreement
  • to undertake a grant benefit to induce the person to accept the benefit
  • person accepting benefit is liable to pay penalty: amount of claim; value of benefit; amount paid/to be paid under composition
How well did you know this?
1
Not at all
2
3
4
5
Perfectly
8
Q

Discuss rehabilitation

A
  • it takes away disadvantages of being insolvent
  • creditors retain rights
  • two types of rehab : automatic and application for rehab
How well did you know this?
1
Not at all
2
3
4
5
Perfectly
9
Q

When may rehab be sought

A

1) composition more that 50 cents in the rand
2) lapse of prescribed period after first account
3) no claims proved after 6 months
4) full payment of claims

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
10
Q

Steps to be taken for rehab

A

1) notice of intention to apply - composition; lapse of period of time; no claims proved; full payment of proved claims
2) security for costs

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
11
Q

Application for rehab

A

1) form and content of application (affidavit) - composition; lapse of time; no claims proved; payment in full
2) master’s report
3) opposition to application
4) adjudication to application

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
12
Q

Discretion of the court for rehab

A
  • courts may:
    1) postpone rehab
    2) grant rehab subject to conditions - ex parte meine; ex parte fowler, section 127(3)
    3) refuse rehab
    4) make considerations in favour of unconditional rehab
How well did you know this?
1
Not at all
2
3
4
5
Perfectly
13
Q

Effects of rehab

A
  • ends seq. period
  • relieves insolvent of disadvantages and debts
  • Section 25(1)
  • property of insolvent doesn’t vest in them again, unless: compensation provides that estate will reinvest in insolvent OR there are no claims proved after 6 months
How well did you know this?
1
Not at all
2
3
4
5
Perfectly
14
Q

Declaratory order for property (rehab)

A
  • if no claim for asset is proved, insolvent can apply for order for entitlement of asset.
  • requirements that need to be met: published notice of intention to apply in GG; serve copy of notice to Master, trustee and creditors; prove that trustee’s and creditor’s have full knowledge regarding claim
  • if creditor objects = insolvent not entitled to property
How well did you know this?
1
Not at all
2
3
4
5
Perfectly