n SA Mercantile Law Journal = SA Tydskrif vir Handelsreg - Abuse of sequestration proceedings in South Africa revisited

Volume 26, Issue 3
  • ISSN : 1015-0099
  • E-ISSN: 1996-2185



'While seeking to portray international society in its totality, I have striven hard not to fall into the trap which sometimes swallows social historians - that is, to leave out chronology and show a world which appears static. I hold strongly that chronology forms the bones of history on which all else is built. The world changed substantially in those fifteen years. In 1815 reaction seemed triumphant everywhere; by 1830 the demos was plainly on its way.'

If one considers these words and applies them to insolvency legislation in South Africa, this legislation appears to show a world which is static. South African insolvency law today is regulated by the Insolvency Act 24 of 1936. It can be described as a creditor friendly system, a system that has remained essentially static since 1936. The pre-eminent policy is that the sequestration of a debtor's estate must be to the advantage of creditors. In this respect recent court judgments in South Africa have focused on sequestration applications that attempt to circumvent this requirement of advantage to creditors. This practice then results in an abuse of the process of the courts. Recently it was pointed out that dishonesty in insolvency proceedings places a burden on creditors and the South African economy in general. This abuse may occur where the costs of sequestration exceed the alleged shortfall between assets and liabilities; where the costs reduce the amount available for distribution to creditors; and where the costs favour administrators rather than creditors. A question considered in this article is to what extent the courts may go in setting requirements to be complied with beyond those in the provisions of the Act, in voluntary surrender of debtors' estates and in compulsory sequestration proceedings. In respect of the requirement that advantage to creditors must be shown in these procedures, Leveson J has been referred to regarding this question when he said that he would not set guidelines to assist practitioners in ascertaining an acceptable dividend for creditors, as this would be encroaching on the functions of the legislature. In this article this question of encroachment, amongst others, is re-visited in an analysis of two recent judgments where insolvency proceedings were abused, namely and .

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