Rehabilitation of an Insolvent Estate
Written by Rohan Lamprecht   

Due to the tremendous amount of queries we received with regards to rehabilitation, we decided to host a short article of the rehabilitation process and a timetable for the aforementioned.

Please note that before we could advise you on your rehabilitation, we will require certain information on your sequestration. This will enable us to establish whether you can in fact rehabilitate immediately, alternatively what period of time must still expire before you can rehabilitate. For more information, send an e-mail to This e-mail address is being protected from spambots. You need JavaScript enabled to view it .

Once we receive your e-mail, we will forward you an excel spreadsheet, requesting certain information. Please complete it thoroughly as possible and e-mail it back to us. Once we receive the spreadsheet, we will contact you and arrange a telephonic consultation to advise you on the rehabilitation of your insolvent estate. Please take note that all information and communications received from you will be protected by attorney and client privilege. It will be treated confidentially and may not be divulged to a third party without your consent.

 

We will now cover the sequence of events as they follow upon one another:

Is Rehabilitation possible?

The first step will be to consult the Timetable for Rehabilitations in order to establish whether or not a rehabilitation application is in fact possible in the specific instance. This timetable will also indicate the relevant section of the Insolvency Act that will be applicable. The applicant’s affidavit in support of their application for rehabilitation must establish prima facie that he or she is in fact able to apply for rehabilitation under the specific section of the Insolvency Act and that its provisions have been complied with.

Notice of intention to rehabilitate

Depending under which specific section the application will be made, notice in intention to rehabilitate must be published in the Government Gazette and written notice must be given to both the Master and the trustee. The aforementioned can be summarized as follows:

  • By publishing an advertisement in the Government Gazette in the prescribe form, according to the following timetable:

No notification Application in terms of Section 124(5)

3 Weeks notification Application in terms of Section 124(1)

6 Weeks notification Application in terms of Sections 124(2) and 124(3)

  • To the Master and to the trustee of the insolvent estate by written notice according to the following timetable:

3 Weeks notification Application in terms of Section 124(1) and 124(5)

6 Weeks notification Application in terms of Sections 124(2) and 124(3)

According to Section 124(4) a trustee who has received a notice for rehabilitation in terms of Sections 124(1), (2), or (3) must report to the Master with any facts which in his opinion would justify the court in refusing, postponing, or qualifying the applicant’s rehabilitation.

Security for costs

Section 125 of the Insolvency Act requires security to be furnished prior to application for rehabilitation to the value of R500. This is for the payment of the costs of any person who may oppose the rehabilitation and be awarded costs by the court. The security must be furnished to the registrar of the court not less than three weeks before applying to the court for the rehabilitation of the estate.

The Application

Section 126 of the Insolvency Act stipulates that in support of the application for his rehabilitation an applicant must submit an affidavit, which must include the following statements:

  1. That a complete surrender of his or her estate has been made;
  2. That he or she has not “granted or promised any benefit whatsoever to any person or entered into any secret agreement with intent to induce his trustee or any creditor not to oppose the rehabilitation”;
  3. A disclosure of his or her current assets;
  4. A disclosure of his or her current liabilities;
  5. A disclosure of his or her earnings at the date of the application;
  6. A disclosure of the dividend that was paid to creditors;
  7. A disclosure of any further assets that are available for realization and the estimated value thereof,
  8. The total amount of all claims proved against the estate;
  9. The total amount of liabilities at the date of sequestration;
  10. A disclosure of any prior insolvency;
  11. A disclosure of any conviction of a fraudulent act in relation to his or her existing or any previous insolvency, or of any offence under Sections 132, 133 or 134 of the Act.

If application for rehabilitation is made pursuant to Section 124(1), the applicant must set out the particulars of the composition and must state whether there are creditors whose claims against the insolvent estate have not been proved, and if there are such creditors, the applicant must state their names, addresses and particulars of their claims.

Trustee’s report to the Master

The trustee who receives a notice in terms of section 124(1), (2) or (3) of the Insolvency Act, must report to the Master “any facts which in his opinion would justify the Court in refusing, postponing or qualifying the applicant's rehabilitation”. It is respectfully submitted that although it is imperative in relation to him, the failure by the trustee to comply with this requirement is not per se fatal to the application.

The purpose of the report is to assist the Master in making his report and if as a result of the trustee’s default the Master is unable to present his report, the Master or the applicant may invoke the provisions of Section 116 bis of the Insolvency Act against the trustee. Such invocation, of course, may involve a postponement of the application for rehabilitation, pending the furnishing by the trustee of his report. No additional fees are payable to the trustee for the furnishing of such a report.

Where, however, the Master it is satisfied and of the assumption that the trustee has nothing to report, stating as such in his report, the Court may adjudicate upon the application notwithstanding the lack of the trustee’s report.

It is submitted that trustee should disclose facts in his report to the Master, which may justify the refusal, postponement or qualification of the rehabilitation, even if in his opinion they do not do so - for the Court’s opinion may in fact prove to be different. The absence of such facts does not justify the trustee’s failing to submit a report: in such a case, his report should state such position. In preparing his report the trustee should have regard to the nature of the discretion that the Court exercises in adjudicating upon an application for rehabilitation and to the matters that ordinarily are relevant for the purpose of the exercise thereof.

Master’s report to the Court

The Master must report to the Court upon the application. For the purpose of such report the Master should have the trustee’s report and copies of the papers in the application that, of course, should be served upon him. The Master should advise the Court of any matters that may affect the fate of the application. In a case where such is required, the Master’s recommendation that the rehabilitation should be granted may be contained in his report.