Questions & Answers
Frequently Asked Questions
Straight answers on how liquidation, sequestration and rehabilitation actually work, and what each one means for you. Still not sure after reading? Get in touch and we'll talk it through.
Liquidation
In South African law a business is a separate legal entity, so its shareholders, directors and members aren't liable for its debts unless they signed personal surety. The application runs through the High Court, and no two cases are quite the same.
Liquidation is a legal process by which a legal entity is closed down, because the business has become insolvent.
There are two main types of liquidation, Voluntary Liquidation and Compulsory Liquidation.
- A company or close corporation is insolvent when the business liabilities exceed its assets. If the business conduct business while factually insolvent, the director(s) will be held personally responsible for any debt incurred.
- Whether the business is able to pay its debts when they become due and payable.
- No trading is taking place.
It depends on the route taken. It can be as quick as ten days, or run to a few months.
Sequestration
We start the court process and secure a hearing date, then notify your creditors that you're applying. From that point you stop paying them, and you don't need to appear in court yourself. A trustee is appointed to administer your estate, and once the set period has passed you can apply for rehabilitation and start again with a clean slate.
- There is no need to appear in High Court. An advocate appears in High Court on your behalf. This is a swift and quick application.
- You get rid of all your debt, including arrear taxes.
- All debt prior to or on date of sequestration falls away.
- Your policies, annuities, pension and personal injury claims etc. are protected and excluded from your insolvent estate.
- Once sequestration is granted all garnishee orders against your salary are removed.
- Your creditors are legally not allowed to attach your income or salary.
- After 6 months or 4 years (depending on circumstances); and after final sequestration order has been granted; you can apply for rehabilitation and your credit status will be reinstated.
- You are blacklisted on all credit bureaus and cannot incur any debt until you have applied for rehabilitation.
- You will not be able to act as a member of Close Corporation or director of the Company until you are rehabilitated.
- You will be unable to have or administrate a trust account, e.g. Attorneys Trust Account, Estate Agent Trust Account.
- Certain high-profile jobs can be affected negatively and thus the company's policies and regulations should be consulted. Alternatively, our offices should be contacted prior to proceeding with the sequestration application.
The debtor's basic necessities, pension and compensation for personal injuries are some of these exclusions.
Contact us so we can discuss it with you.
No. Payments to creditors stop with immediate effect.
Your salary stays untouched.
Your vehicle forms part of your insolvent estate, but you can buy it back.
They need to be referred to your trustee.
Yes, after rehabilitation.
It depends on how soon a court date can be secured.
Rehabilitation
Rehabilitation is the legal process that lifts the status of insolvency from someone who has been sequestrated, restoring them to the standing of a creditworthy consumer.
- The sequestration order.
- Certificate of appointment of trustee.
- The Section 81 report.
- The first and final Liquidation and Distribution account (L & D).
- Confirmation letter in respect of the first and final Liquidation and Distribution account.
- Date when the first and final Liquidation account was confirmed by the Master of the High Court.
- At Any Time:
- Section 124(1): An offer of the composition of at least 50 cents in the rand to concurrent creditors is made and accepted by three-quarters of creditors in value and number.
- Section 124(5): After full payment of all proved claims. Any time after confirmation of estate account.
- Six Months: If no claims have been proven in against the insolvent estate and not previously insolvent and no convictions of certain offenses.
- Four Years: Four years from date of sequestration and one year after confirmation of the first liquidation and distribution account.
- Previously Sequestrated: If previously sequestrated, four years from the date of sequestration and three years after the confirmation of the first liquidation and distribution account.
- Five Years: If you have been convicted of a criminal offense in your insolvent estate, you may apply for your rehabilitation five years after your conviction.
- Efflux of Time: If you have not applied for your rehabilitation, you become automatically rehabilitated after ten years.
- After the process you are not insolvent anymore.
- You can be creditworthy again.
- It can be a lengthy process.