“CAN SEQUESTRATION BE REVERSED?” AND OTHER QUESTIONS ANSWERED
One of the questions that is often asked is: “Can sequestration be reversed?” Though it seems like a straightforward question, several factors must be considered.
For one, a sequestration application can be reversed only if notices to the effect have been published in the Government Gazette and the local papers in which the original notice of intention to voluntary sequestrate has been published. In addition, the Master of the High Court must be informed, as well as SARS and the creditors.
The question should rather be: “Can a sequestration be reversed without the risk of it being an act of insolvency?” The answer is no. Once the intention to apply for sequestration has been published and the applicant thus receives protection against further legal action by creditors, the applicant cannot decide not to proceed with the application, unless the applicant has a valid reason, such as being able to pay the creditors, as well as the interest, and legal fees up to date.
However, the creditors can still see it as an act of insolvency and thus take the necessary steps for judgement against the debtor. Indeed, though it is possible for a sequestration application to be reversed, the creditors still have full right to then proceed with their legal action against the debtor. It is seen as unethical to have the sequestration reversed before the hearing date, as many such debtors use the process to stay a sale of execution. In this instance, one cannot blame the creditors for wanting to take legal action against the applicant.
But when else can sequestration be reversed? If one refers to the process of rehabilitation of the insolvent party’s financial estate, it can be seen as a reversal of the sequestration. Rehabilitation brings an end to the sequestration. This means the insolvent party’s legal standing and thus capacity to manage their financial affairs will be that of rehabilitated. The party is no longer insolvent or bankrupt, as is the legal term for it. The person can enter credit agreements without written permission from the trustee or curator. In addition, the person can take their inheritance money if relevant in ownership.
The same person is once again able to be a director of a company or member of a close corporation. Certain government positions can once again be filled.
As can be seen from the above information, the effects of sequestration can be reversed, provided all the requirements have been met. This includes the fact that the creditors must have received their minimum benefit, the trustee must have submitted the first liquidation account, and they must give permission for the rehabilitation. To this end, it is important for the sequestrated party to give full cooperation in terms of scheduled meetings with the trustee and creditors.
To come back to the issue of whether a sequestration application can be reversed without it being an act of insolvency, the answer is yes. This is provided the Master of the Court has given permission for such and the applicant has published a notice to the effect in the Government Gazette.
The Master of the Court must be satisfied that the application has been done in good faith and that the applicant has a valid and good reason for withdrawing the application to surrender their estate.
It is possible for the notice of surrender to lapse. This is the case if the court rejects the surrendering of the applicant’s estate. It is also when the debtor does not apply for the surrendering of their estate within 14 days after the publication of the date of the hearing. The notice of surrender also lapses if the sequestration has not been done according to legal formalities.
Where a curator bonis has already been appointed to oversee the estate’s assets, then the debtor must receive control back over the estate. Keep in mind that the costs already incurred by the curator must be paid by the debtor.
Rather seek legal guidance as opposed to relying on information from the Internet to make an informed decision on whether or not to have the sequestration reversed. Our attorneys are experienced insolvency lawyers and are thus able to ensure compliance with any and all legal requirements and formalities in terms of the reversal.
Disclaimer: This article is for informational purposes only and does not constitute legal advice. Call on our attorneys rather than relying on the information herein to make any decisions. The information is relevant to the date of publishing.