7) Realization & Distribution of Assets Flashcards
what is the process of realizing and distributing assets?
1) appointment of the trustee/liquidator
2) meetings of creditors
3) proof of claims
4) different classes of creditors, distribution
how is the trustee/liquidator appointed?
at the first creditors meetings by majority number of creditors and majority in value of claims
who cannot be a trustee/liquidator?
- minor / legally disabled person
- an insolvent or relative
- non-resident
- JP or prev. director thereof
- creditor of the insolvent
what are the requirements for creditors meetings?
- first meeting = appointing the trustee/liquidator
- second = for creditors to prove their claims and receive a trustee’s report on the estate / company affairs
- may be more if necessary
how and why do creditors provide proof of claims?
- so they can get their money from the estate and so they vote on admin matters
- with an affidavit which sets out facts and nature about the claim
what happens once the creditors prove their claims?
- trustee will realize assets
- draw up estate accounts (liq and dist accounts, setting out what each asset realized and who gets paid what)
where are the liq/dist accounts available?
at the office of the Master for creditors to inspect/dispute them
what if realization proceeds are insufficient to cover all costs of seq/liq?
trustee/liquidator will draw up a plan of contribution which sets out how much each concurrent creditor who has proved a claim will have to contribute
what is the order of preference of creditors?
1) preferred (1. secured and 2. preferrent)
2) concurrent
what are preferent creditors entitled to?
are entitled to be paid out of the free residue before concurrent
what is the free residue?
part of the estate remaining after secured creditors are paid. the proceeds of other assets sold are added to this.
what is the ranking of the preferent creditors?
1) death expenses (for insolvent, spouse, child, max R300)
2) seq costs (first Sheriff, then Master, then everyone else)
3) execution costs
4) arrears salaries/retrenchment pay (12000) or leave pay (4000)
5) money ito of statutory provisions
6) SARS
g) claim under GNB
what happens if the secured creditor’s property over which they hold security does not cover entire claim?
they can claim balance as concurrent, but may not want to at risk of incurring costs
what is composition?
(only NPs)
at anytime after first creditor meeting, insolvent may offer composition to trustee in which they offer to pay all debts in full/part over extended time period
what is compromise?
(only JPs)
at anytime after first creditor meeting, insolvent may offer composition to trustee in which they offer to pay all debts in full/part over extended time period
who must accept the offer comp?
creditors – 75% in both value and number
how can rehabilitation come about?
- automatically after 10 years
- by application of court before 10yr expiry
what is the section number for rehabilitation?
s127(A)(1)
what must an insolvent do to end insolvency before 10yrs?
- must make an appl. to HC
- court has discretion
when can the debtor end insolvency early?
a) composition of no less than 50c in the rand (insolvent must get Master confirmation thereof that concurrent accepted)
b) lapse of time after confirmation of first liq/dist account (12 months after)
c) no claims proven
d) full payment of claims (plan approved by Master)
what are the requirements for a lapse of time?
- may not apply less than 4yrs after seq unless Master recommends
- can only apply after 5yrs if convicted of fraud relating to one of his seqs
- if not first seq, 3yrs must pass
what are the requirements for no claims met?
- no claims proven at time of application
- not convicted of fraud
- not prev. seq
who should use the no claims thing for insolvency?
partners where the p/ship estate is insolvent
effects of rehab?
1) end of seq
2) ends debts pre-seq
3) relieves insolvent of legal disability
4) property vested in trustee stays there for creditors benefits, unless composition agreements states otherwise / basis of rehab = no claims)
