Business Rescue: Are Your Suretyships Enforceable? A R5.5m Lesson for Directors and Creditors

Business Rescue: Are Your Suretyships Enforceable? A R5.5m Lesson for Directors and Creditors

When a company goes into business rescue, creditors are often in for a beating. So as a creditor, if you had the foresight to cover your position upfront with personal suretyships from individuals with assets (normally the directors of the debtor company), you will no doubt be keen to recoup your losses by calling in those suretyships asap. What happens though if you assent to a business rescue plan whereby the debtor company’s debt to you is extinguished? Does that also extinguish the surety’s personal liability to you? Let’s have a look at the lessons for both creditors and directors…
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Directors at War and the Liquidation Option – A Tale of Sibling Rivalry

Directors at War and the Liquidation Option – A Tale of Sibling Rivalry

A company’s directors have both the power and the duty to manage the company’s affairs for its benefit. When two or more directors are in place, it’s perhaps natural for the occasional disagreement to arise between them. Indeed, regular expression of a variety of different viewpoints and ideas can make for a strong, dynamic board and business. Provided, that is, that the directors are in the end result still able to agree on the decisions vital to their company’s continued operations. What happens though when disagreements and disputes escalate and make it impossible to continue running the business? Typically, communications…
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Proving Your Claim in a Liquidation or Sequestration – When You Should, and When You Shouldn’t

Proving Your Claim in a Liquidation or Sequestration – When You Should, and When You Shouldn’t

Having to write off bad debt is one thing – having to pay in even more money for the privilege is just adding insult to injury. Yet that is exactly the danger you face if one of your debtors is sequestrated or liquidated (we start off by explaining the different terminology) and you prove your claim without considering the “danger of contribution”. What is that? How does it arise? What if you are a petitioning creditor or hold security for your claim? How can you protect yourself from having to contribute? Read on for the answers… The background You are owed…
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Your Body Corporate and Arrear Levies: To Sequestrate or Not To Sequestrate?

Your Body Corporate and Arrear Levies: To Sequestrate or Not To Sequestrate?

Levies are the lifeblood of a sectional title scheme, and the Body Corporate has a duty to recover arrears from defaulting owners. It has the power, in addition to following standard debt collection procedures and perhaps approaching the Community Schemes Ombud for assistance, to apply for the sequestration of the owner’s estate. Indeed just the threat of a sequestration application is sometimes enough to frighten a recalcitrant debtor into paying up. But, as Shakespeare might have put it, there’s an alarming “rub” here that body corporate trustees ignore at their peril. It arises from ‘the danger of contribution’ in insolvent…
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Suing an Insolvent Debtor – Can You Recover from his Trust?

Suing an Insolvent Debtor – Can You Recover from his Trust?

Your debtor owes you a fortune, but when his estate is sequestrated there is nothing in his own name. However you find out that he is trustee of a wealthy family trust with lots of assets that you think are really his – can you recover from his trust? The answer is yes, you can, but only in certain circumstances, and only by choosing the right line of attack. A recent Supreme Court of Appeal (SCA) case illustrates. A Ponzi scheme, a suicide, and R11m worth of missing cattle A former farmer and cattle dealer committed suicide, leaving debts of…
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