Insolvency Law (MRL3701) - UNISA LLB

• This module introduces Insolvency Law (MRL3701).
• It is a third-level course focusing on insolvency law, liquidation of companies, and business rescue.
• The module is a requirement for an LLB degree at Unisa.

Importance of Insolvency Law

• People become insolvent when their debts exceed the value of their assets.
• Insolvency may lead to sequestration of a debtor's estate.
• Insolvency is referred to as bankruptcy and liquidation in the UK (English law) and USA (American law).
• Insolvency can arise from misfortune or poor financial management.
• Insolvency Law provides a procedure for sequestration to fairly distribute a debtor's assets among creditors.
• It also allows debtors rehabilitation to make a fresh financial start and protection from creditors.
• Juristic persons, like companies, can also become insolvent.
• Company estates undergo "liquidation" or "winding up" rather than "sequestration".
• The module provides a brief overview of liquidation and rescue processes for companies and close corporations.

Key Aspects of the Module

• Insolvency Law is mainly governed by the Insolvency Act 24 of 1936.
• The module will detail the impact on juristic persons through company acts.
• It covers the sequestration process, including obtaining a sequestration order.
• It includes the appointment of trustees.
• It involves the administration and distribution of the insolvent debtor’s assets, and rehabilitation.
• The module describes the insolvency and winding up processes.
• Debtors or creditors can apply to the High Court for sequestration or winding-up orders.
• Sequestration or winding-up significantly affects the debtor's status, capacity, and control of property.
• The impact of sequestration extends to the spouse of the insolvent debtor of a natural person.
• A trustee is appointed to administer an insolvent estate.
• A liquidator is appointed to administer a company or close corporation in winding up.
• The appointee takes control and collects the debtor's property.
• Trustees or liquidators can challenge suspicious transactions made before sequestration or winding-up.
• The goal is to expand assets for creditors' claims.
• After meeting requirements, a natural person can apply to the High Court for rehabilitation.
• A rehabilitation order ends sequestration, allowing the person to conduct business without disabilities.
• When winding-up of a company or close corporation is complete, the entity is dissolved and ceases to exist.
• A natural person may enter a compromise with creditors for partial payment.
• If the partial payment is more than half the value of certain claims, they may apply to the High Court for rehabilitation..
• Juristic persons can be rescued without winding up through contracts of compromise.
• There are instances when winding up is an option, but it is seldom successful.
• Several aspects of insolvency law have been affected by the Constitution of the Republic of South Africa, 1996.

Additional Aspects Covered

• Obtaining a sequestration order.
• Voluntary surrender of the estate by the debtor.
• Compulsory sequestration of the estate on the application of the creditors.
• The legal position of the insolvent.
• Vesting of the assets of the insolvent.
• Vesting of the assets of the solvent spouse.
• Uncompleted contracts.
• Meetings of creditors.
• The election of the trustee.
• Impeachable dispositions.
• Creditors' claims and their ranking.
• Composition.
• Rehabilitation.
• Partnership and sequestration.
• Winding-up of companies.
• Winding-up of close corporations.
• Business rescue and compromise.

Learning Material Package

• Individual Learning Units guide you through the prescribed textbook, legislation, and cases.
• Tutorial Letter 101 provides information on contacting the University and administrative matters.
• The prescribed textbook is: Smith, Van der Linde, Calitz, Hockly's Law of Insolvency Law, Winding-Up and Business Rescue 10th ed. (2022), JUTA.
• Tutorial Letter 201 includes suggested answers to assessments and advice on examination preparation.

Assessments

• There are two compulsory assessments to submit for marking.
• There is a voluntary self-test assessment, with answers in Tutorial Letter 201.
• Self-test questions help you understand the textbook, cases, and learning material without looking at the answers immediately.
• Self-test questions help you understand the main principles in each learning unit.
• Refer to Tutorial Letter 101 for exam information.
• Online classes assist in learning, but attendance is not compulsory.