Sequestration and Liquidation Attorneys in Johannesburg

Sequestration generally applies to the estate of a natural person, while liquidation applies to a company or close corporation. Both processes place the insolvent estate under formal administration, but the legal tests, documents, consequences and role-players differ. An attorney can help determine the correct procedure and whether a court application, voluntary process or alternative solution is available.

A debtor may apply for voluntary surrender of their estate if the legal requirements are met. The court must be satisfied that the estate is insolvent, that the process will be to the advantage of creditors, and that the procedural requirements have been followed. It is not simply a way to write off debt, and the consequences must be understood before taking the step.

A creditor may bring a compulsory sequestration or liquidation application if the debtor is insolvent or has committed an act of insolvency, and the statutory requirements are met. The papers must be properly drafted and served. A debtor who receives such an application should obtain advice immediately, because strict deadlines and serious consequences apply.

In sequestration matters, the court generally requires a real prospect that creditors will receive some benefit from the process. This may come from assets, income contributions or recovery of impeachable dispositions. The test is fact-specific, so a proper assessment of assets, debts and likely administration costs is important.

After sequestration, the insolvent estate vests in the trustee once appointed. Assets may be realised for the benefit of creditors, subject to legal rules and exemptions. A person should not dispose of assets or prefer creditors without advice, as certain transactions may be challenged.

A company is a separate juristic person, but directors may face personal risk where they have signed suretyships, traded recklessly, breached statutory duties, misapplied company assets or made misleading representations. Directors should obtain advice before making payments or signing resolutions when a company is distressed.

Business rescue may be appropriate where a financially distressed company has a reasonable prospect of rescue or a better return for creditors than immediate liquidation. It is not suitable for every failed business. Legal and financial advice should be obtained quickly because timing and creditor confidence are critical.

A liquidation application may be opposed where there is a genuine dispute about the debt, the company is not commercially insolvent, the process is abusive, or procedural requirements have not been met. Opposition must be properly supported by evidence and filed within the required time period.

Liquidation affects employment contracts and may trigger consultation, claims against the estate and UIF or other statutory processes. Employees may have claims for unpaid salary, leave and severance depending on the facts and applicable labour law. Employers and employees should obtain specific advice.

The timing depends on whether the application is opposed, court availability, the appointment of a trustee or liquidator, asset recovery and creditor claims. The court order is only one stage; estate administration may continue afterwards. An attorney can explain the likely stages based on the documents.