Cape Town - Former ANC Youth League president Julius Malema is about to be sequestrated, according to a report
The South African Revenue Service (Sars) has applied to the North Gauteng High Court to have Malema sequestrated. He owes Sars R16m, is “factually insolvent and in no position to make payment of his
indebtedness to Sars”, according to court papers, said City Press.
But what exactly does that mean? Advocate Kobus Engelbrecht, marketing head: Sanlam Business market puts the procedure Malema is set to undergo, in perspective.
If a person commits an act of insolvency, a creditor can apply for his sequestration. In terms of section 8 of the Insolvency Act, 1936 (Act No 24 of 1936) there are eight acts of insolvency. Section 8(g), for example states:
A debtor commits an act of insolvency-
g) if he gives notice in writing to any one of his creditors that he is unable to pay any of his debts.
So say for example, A owes a R 100 000 to B. B now asks A to repay him and A writes to B, saying that he cannot pay him.
In terms of the abovementioned section of the Insolvency Act, 1936 (Act No 24 of 1936), B can now apply for the sequestration of A.
If B’s application to the court is successful, A’s estate will be put under the management of a trustee, who will sell all A’s assets and with the funds raised this way, pay all debtors.
Insolvency means that you have more liabilities than assets. That could mean that all debtors will not be paid in full, but will only receive a certain percentage of the money owed to them. Certain creditors rank above others in terms of preference.
So it could mean that certain creditors (like secured creditors) could be paid in full and others will only receive a portion of the money owed to them.
If a debtor complies with the requirements of the Insolvency Act, that debtor could also apply for the voluntary surrender of his estate. If successful, that will also result in the sequestration of his estate with the same results as described above.
Sequestration gives a debtor the opportunity to rid himself from debts that he cannot pay and to have a fresh start in life. The process helps creditors to recover some (or in the case of a secured creditor, all) the money owed to them.
Only time - and the courts - will tell what will transpire in Malema's case.