AVOID THESE OFFENCES WHEN YOU APPLY FOR SEQUESTRATION IN SOUTH AFRICA
You can apply for sequestration in South Africa if you are cash and capital insolvent. This means you must be unable to pay your debts when due and your liabilities must exceed your assets. That said, it is possible to still apply for voluntary sequestration if you are cash-flow insolvent. This may be the case when your assets are not liquid, and you are unable to sell them or use them towards meeting your debt obligations. To this end, we recommend consulting insolvency attorneys about the requirements and process.
Voluntary sequestration in South Africa is a legal process whereby you apply to court with the help of insolvency practitioners, to be declared bankrupt. The court will only award the sequestration if it is to the benefit of the creditors (they must receive at least 20 cents out of the rand), the court is satisfied that you are truly insolvent, and the cost of the sequestration can be paid.
We look at parts of the process of applying for voluntary sequestration in South Africa, with the focus on mistakes and offences to avoid before and during the application process.
PUBLICATION OF THE NOTICE OF YOUR INTENTION TO SURRENDER YOUR ESTATE IN SOUTH AFRICA
As part of the application process, the insolvency practitioners, on your behalf, publish a notice in the Government Gazette and relevant newspapers to inform creditors of your intention to sequestrate. This is one of the most important preliminary formalities as it gives creditors fair warning of your application. Once the notice has been published, you cannot simply decide not to proceed with the application. Unless your situation has truly changed and you can then make good on all your debts, the creditors have the right to apply for your compulsory sequestration in such an instance. You can thus not publish the notice with the hope that it would give you time to get money together while the interest on your debts is frozen.
It is an offence to try and convince any of the creditors not to oppose your application for sequestration in South Africa. You may also not make false statements or try and mislead creditors with the notice. You may not hinder a creditor that wants to investigate your financial affairs to determine the legitimacy of your application to surrender your estate.
APPOINTMENT OF THE TRUSTEE TO MANAGE THE SALE OF ASSETS IN SOUTH AFRICA
Once the court awards the bankruptcy status, a trustee is appointed. You will be required to attend a meeting with the appointed trustee and the creditors. Failure to attend is an offence and can severely affect the ability to rehabilitate at the soonest date when the requirements are met.
It is imperative to answer truthfully on all questions when you are summoned to give evidence at insolvency proceedings as called by the trustee. Even your spouse must be truthful in their answers if they have to give evidence at such proceedings. You may not refuse to answer the questions posed to you at such proceedings, may not leave the country in an attempt to avoid attending the meeting, and may not conceal yourself. When you apply for sequestration in South Africa, your insolvency practitioners will help you draft the necessary statement of affairs and the affidavit. They will be truthful, but it will be up to you to ensure you do not commit an offence by not attending the necessary meetings or answering questions at such proceedings.
Within 14 days of the trustee’s appointment, you will be required to furnish the trustee with information regarding the whereabouts of the property included in the surrendered estate. You may also need to deliver property in your possession. You will be required to furnish the relevant books and documents in your control. Failure to give the necessary information and documents is a criminal offence. Rather than risking being caught on the wrong side of the law, make use of experienced insolvency practitioners to help ensure full compliance of the requirements.
CRIMINAL OFFENCES BEFORE YOU APPLY FOR SEQUESTRATION IN SOUTH AFRICA
Certain actions within two years of the sequestration proceedings in South Africa can land you in deep water with the law. Therefore, seek legal guidance before the application to ensure you do not commit a crime without knowing it. If you have, during the period, made a verbal or written statement in your communication with a creditor and concealed your financial obligations and your future financial obligations, you would have committed an offence.
In any such statements to the creditors before the application for sequestration, you may not hide the full extent of liabilities, state you have an asset that is not really one, or misrepresent the value of the assets. You may not give the impression that you have more assets than those that really belong to you. It is an offence to hide a financial loss or misrepresent the extent of the financial loss.
If you are asked to collect or help the trustee take control of the property that must be sold and you decline to help, you commit an offence. Should the trustee ask you to explain why you have more liabilities than assets and you lie or give incorrect information, you commit an offence.
Should you become aware of a false claim against your estate, you are obliged to inform the trustee about the falseness of the claim. You also need to inform the Master of the High Court.Even something that may seem irrelevant and unimportant to you, such as ensuring that you notify the trustee of change in your physical address, is an offence.
STATEMENT OF YOUR FINANCIAL AFFAIRS SUBMISSION TO THE MASTER OF THE HIGH COURT IN SOUTH AFRICA
You will be required to submit an affidavit to the Master that details your financial affairs and assets. This must be done within seven says of such becoming due. Fortunately, when you have experienced insolvency practitioners to represent you, they will make sure that the necessary affidavits are submitted at the correct time.
ANY OF THESE ACTIONS IS A CRIMINAL OFFENCE WHEN YOU APPLY FOR SEQUESTRATION IN SOUTH AFRICA:
- Conceal, sell, or destroy assets in your possession and that form part of your estate if such assets are not yet paid for in full.
- Hide or attempt to hide your financial documents and assets that must be furnished to the trustee.
- Remove, dispose, or attempt to destroy or sell assets if such an action disadvantages one or more creditors.
- Failure to keep record of financial transactions prior to the application for sequestration in South Africa if it is part of your occupation to keep financial records.
You must keep record of transactions. Although it is not expected that it be perfect, the level of keeping record of assets and transactions must be reasonable.
Given how many actions are offences before, during, and after the surrendering of your estate, it is best to get in touch with experienced insolvency attorneys who can help to ensure through information, guidance, and help that all procedures are followed correctly.
They can help you avoid committing a criminal offence because of ignorance related to what is seen as an offence. Get the legal help you need to apply for sequestration in South Africa. Call on our insolvency attorneys for guidance and assistance.
Disclaimer: Information in this article is not intended as legal advice and is only for informational purposes. Please seek legal guidance from our attorneys before relying on this information to make any legal decisions.