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2023+week+11 Composition+and+rehabilitation

This document discusses composition and rehabilitation under South African insolvency law. It explains that composition can take two forms: common-law composition where a debtor avoids sequestration by reaching an agreement with creditors; or a formal offer under section 119 of the Insolvency Act submitted by a trustee. Rehabilitation may occur automatically after 10 years or through a court application, bringing an end to sequestration and discharging all debts, giving the insolvent a fresh start. The document outlines the requirements and effects of these insolvency processes under South African law.

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33 views10 pages

2023+week+11 Composition+and+rehabilitation

This document discusses composition and rehabilitation under South African insolvency law. It explains that composition can take two forms: common-law composition where a debtor avoids sequestration by reaching an agreement with creditors; or a formal offer under section 119 of the Insolvency Act submitted by a trustee. Rehabilitation may occur automatically after 10 years or through a court application, bringing an end to sequestration and discharging all debts, giving the insolvent a fresh start. The document outlines the requirements and effects of these insolvency processes under South African law.

Uploaded by

Joshua Oncker
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as PPTX, PDF, TXT or read online on Scribd
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INS311

2023
WEEK 11 Professor Michel Koekemoer

Composition and rehabilitation


Note: Parts of these notes are an adaptation of:
AD Smith ‘Hockley’s Law of Insolvency” (2022) Cape Town, Juta
These notes contain simplifications for better understanding. For more
detail, refer to original text.
The graphics were obtained online and the URL where it was obtained is included with each graphic.
OUTCOMES FOR THIS WEEK
Composition
To explain the differences between common-law composition and
composition in terms of the Insolvency Act.
To discuss the format of the composition offer made under s119 of
the Insolvency Act.
To explain what the terms of composition made under s119 of the
Insolvency Act can be.
To explain what the requirements are for the acceptance of an offer
for composition made under s119 of the Insolvency Act.
To discuss the consequences attached to acceptance of an offer for
composition made under s119 of the Insolvency Act.
OUTCOMES FOR THIS WEEK
Rehabilitation
To explain the different instances when
rehabilitation may be granted.
To discuss when and how the application to
court must occur in relation to an application for
rehabilitation within 10 years.
To explain what the effect of rehabilitation for the
insolvent would be.
Composition
 Two forms, common-law compromise, or compromise in terms of s119 of
the Insolvency Act.
COMMON LAW
 Debtor in financial difficulty, whose estate has been provisionally
sequestrated can avoid final sequestration by reaching a compromise with
his creditors and provisional trustee.
 What does this mean?
 the debtor will pay certain amounts in respect of creditor’s claims and the
provisional sequestration order will be discharged and the debtor released from
his debts.
 A compromise must be accepted by all creditors.
Section 119 composition
Submission of offer to creditors via trustee
When?

Terms

Acceptance

Consequence
Rehabilitation
Automatic after 10 years or by court within 10 years
 Rehabilitation brings to and end the sequestration of the
debtor’s estate. All the debtor’s debt will be discharged.
 The debtor now gets a ‘fresh start’, and all debts are
discharged.
Rehabilitation by court
When?
 Composition of at least 50c in the rand
 Lapse of the prescribed period after confirmation of the first account
 No claims proved after six months
 Full payment of all proved claims

How?
 Notice of intention to apply
 Security for costs
 Court’s discretion
Effect of rehabilitation

Putting an end to the sequestration.


Discharging all the insolvent’s debts which were
due before sequestration and which did not arise
out of fraud on his part
Relieving the insolvent of all disabilities caused
by the sequestration.
Declaratory order regarding
property

 Where the insolvent can show that neither the trustee nor a
creditor laid claim to an asset, the insolvent can ask as part of
the rehabilitation order that the insolvent is entitled to such an
asset.
oTake note there are specific requirements you would have
to comply with in this regard.
Thank You.

Questions?

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