Insolvency & Business Rescue

Insolvency refers to the situation in which a firm or individual is unable to meet financial obligations to creditors as debts become due. ‘Sequestration’ refers to the bankruptcy of a natural person or a Trust. Once a natural person is sequestrated the Master of the High Court appoints a Trustee who must take control of the assets. Sequestration of a person’s estate results in a change in his status. This means that his contractual capacity and his right to enforce certain claims are diminished. Certain positions and appointments are also forbidden.

‘Liquidation’ refers to the bankruptcy of a company or close corporation and certain other legal entities. The liquidation of a Company / Close Corporation is a legal process whereby the Company and its affairs are placed under the control of a liquidator who must wind up the estate (realize the assets and divide the assets amongst creditors) in accordance with the provisions of the Companies Act.

Business rescue aims to facilitate the rehabilitation of a company that is "financially distressed" by providing for the temporary supervision of the company and management of its affairs by a business rescue practitioner and the development and implementation of a business rescue plan.

These proceedings are generally regulated by the Insolvency Act, 1936 and the Companies Act, 2008.