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Lopf Lu 8

The document discusses how insolvency influences legal status and capacity. It notes that while an insolvency order transfers control of assets to a curator, it does not affect one's general capacity to act. However, an insolvent has limited capacity regarding contracts and businesses. Specifically, insolvency stays most civil legal proceedings and influences one's ability to hold certain offices or positions related to businesses.

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37 views11 pages

Lopf Lu 8

The document discusses how insolvency influences legal status and capacity. It notes that while an insolvency order transfers control of assets to a curator, it does not affect one's general capacity to act. However, an insolvent has limited capacity regarding contracts and businesses. Specifically, insolvency stays most civil legal proceedings and influences one's ability to hold certain offices or positions related to businesses.

Uploaded by

Mbalenhle Ndlovu
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
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Download as PDF, TXT or read online on Scribd
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LU 8

I N S O LV E N C Y A S A
FAC TO R W H I C H
I N F L U E N C E S S TAT U S
INTRODUCTION
• Normal mental abilities

• Court can limit the capacities of an insolvent

• Declaration of insolvency by the High Court – is a status determining factor

• It is the court order which influences the status of the insolvent person

• Limitations placed on a person declared insolvent = is not punishment of


the insolvent but its measures to protect the public
DEFINITION

INSOLVENT

A person who is unable to settle his or her debts

Because of the fact that his liabilities exceed his assets


EFFECT OF INSOLVENCY ON CAPACITY
TO ACT
• Sequestration order
– Results in insolvent losing control of his estate
– But does not affect his capacity to act

• Insolvent can – with certain exceptions – perform any legal act

• HOWEVER – he or she may not dispose of any assets in the insolvent estate
UMZINYATHI DISTRICT MUNICIPALITY V
TRANSGLOBE INDUSTRIAL HOLDINGS

• If an application is brought to declare a person insolvent –

– A successful counter- application would have the effect of the respondent being declared solvent
• Insolvency Act 24 of 1936

– Provides for certain contracts that can only be concluded with the consent of
the insolvents curator:

• Contracts which are likely to have an adverse or seemingly adverse effect on the
insolvent’s estate
• Contracts that have any relation to the business of a general dealer or
manufacturer
• Davel and Jordaan
– Come to the conclusion that the insolvent only has – in the above circumstances – limited capacity
to act

• Should insolvent conclude a contract in contravention to the provisions of the Insolvency Act
– Contract will be voidable at the choice of the insolvent
EFFECT OF INSOLVENCY ON THE
CAPACITY TO LITIGATE
• Section 23(6) of the Insolvency Act
– All civil proceedings against an insolvent are stayed
– Both proceedings instituted by and against the insolvent

• EXCEPTIONS = where insolvent will retain his capacity to litigate


(Section 23(6)):
– Cases in which the dispute has an effect on the insolvent’s status – OR – any
right which does not affect the insolvent’s estate
– Actions concerning defamation or personal injury

– Cases in which the dispute arises from a juristic act into which the insolvent was competent to
enter

– Actions to recover pension to which the insolvent is entitled


EFFECT OF INSOLVENCY ON LEGAL
CAPACITY
• Person’s legal capacity is influenced by a declaration of insolvency
• Insolvent can follow any profession or occupation

• EXCEPT:
• Carrying on a business of a general dealer or a manufacture – OR
• Be employed or have an interest in such a business
• May not hold certain offices:
– Curator of an insolvent estate
– Holding a liquor license
– Employee of a general dealer or manufacturer
– Owner of a general dealer or manufacturer

Can only act as the director of a Company with permission from the High Court

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