GET LEGAL GUIDANCE FROM PROFESSIONAL INSOLVENCY PRACTITIONERS TO AVOID SEQUESTRATION PITFALLS
Our professional insolvency practitioners work with voluntary sequestrations and liquidations on a daily basis. As such, we are able to help you avoid costly pitfalls regarding debt solutions. In addition, we are committed to providing you with sufficient information to help you make an informed decision about your current and future financial affairs.
We thus recommend that you seek legal guidance from our team of professional insolvency practitioners regarding aspects of insolvency, whether these are related to the liquidation of your business, sequestration with immovable property or without, whether you qualify for voluntary sequestration, and how rehabilitation works. As experienced, professional insolvency practitioners, we are also able to help minimise the effect of the sequestration or liquidation and provide you with information related to aspects such as what property is included in the estate, how long it takes to complete the sequestration process, and more. To help you understand important aspects of insolvency, we briefly look at two of the questions you may have. Note that no two sequestrations or liquidations are the same and your particular circumstances must be taken into consideration. For in-depth discussion and legal help, best speak to our team of professional insolvency practitioners.
CAN AN INSOLVENT PARTY BE IMPRISONED FOR ACTS RELATED TO THE SEQUESTRATION?
Yes. Certain acts committed before the sequestration are illegal. Those acts would not have been illegal if committed by a solvent party, but if someone is insolvent, these acts are considered crimes. An insolvent party can be prosecuted for not keeping proper records and gambling away assets. Certain acts are also illegal and constitute criminal offenses if committed during the voluntary sequestration. An example is where the insolvent party enters into a credit agreement without informing the creditor about their insolvent status. To avoid unknowingly performing an illegal act during or before the sequestration, speak to our team of professional insolvency practitioners about such acts that are not allowed. Being informed will help you to avoid pitfalls, which could also affect your ability to apply for rehabilitation.
WHAT IS REHABILITATION AND WHY IS IT IMPORTANT?
When you apply for voluntary sequestration, you apply to be declared bankrupt. As such, you surrender your estate and thus lose control over the financial affairs associated with the estate. A trustee manages the estate and you require the permission of the trustee/curator to enter into credit agreements. If you inherit property during the insolvency, such property forms part of the insolvent estate. You cannot hold the position of director in a company and cannot hold certain professional and governmental positions. You must disclose your insolvency status to a creditor, should you apply for credit. You must handle your financial affairs in such a manner as to ensure approval from the trustee. Your ITC record will indicate that you are insolvent.
Rehabilitation is a legal process whereby you apply to be relieved from the status of being insolvent. Once rehabilitated, you are once again able to enter in credit agreements without the permission of the trustee, and can hold director positions and certain governmental positions that were prohibited while you were insolvent. You regain full control over your financial affairs. Your ITC record is amended to show that you have been rehabilitated. The status remains the same for a period of five years, whereafter it is removed. In essence, rehabilitation ends the insolvency.
It is possible to become rehabilitated in a shorter time, provided the claims have been fully paid. It is also possible if the creditors accept a composition and you have made payment of a minimum 50 cents out of the rand for all claims. However, certain requirements must be met, best discussed with our professional insolvency practitioners. A specific period must have lapsed before you can apply for rehabilitation. The timeframe depends on factors such as whether it is your first sequestration, whether you have cooperated with the trustee, whether you have been involved in any fraudulent acts during the sequestration, and whether all claims have been paid. Our professional insolvency practitioners will explain the requirements for rehabilitation and help you through the process.
If you do not apply for rehabilitation, you will remain insolvent for a period of ten years, whereafter you will automatically be rehabilitated. However, it is best to apply for rehabilitation as soon as the requirements are met to ensure that you can regain full control over your financial estate.
Disclaimer: This article is for informational purposes only and does not constitute legal advice. Call on our attorneys for legal advice, rather than relying on the information herein to make any decisions. The information is relevant to the date of publishing – May 2018.