advantage to creditors

616 Words2 Pages

Section 6 (1) of the Insolvency Act requires the insolvent debtor to satisfy the court that sequestration will be to the advantage of the creditors. This onus is difficult to discharge, as many insolvent debtors do not have sufficient assets to provide for the benefit of creditors.

There are many fundamental rights in the Constitution that the Insolvency Act poses a threat to, including section 9, the right to equality. One must keep in mind that even if a right is being inflicted upon, it does not automatically make that legislation constitutionally invalid. Section 36 of the Constitution, the limitation clause, allows for limitation of certain rights, if it reasonable and justifiable.

If it is proved that this right is restricted in terms of s36, then it is of the utmost importance to pay regard to requirements of s36. The limitation is supposed to be reasonable and justifiable based on human dignity, equality and freedom. Certain factors are taken into account, including if there are less restrictive means to achieve this purpose. It is apparent that the requirement in terms of voluntary surrender is too restrictive and there are other possibilities to achieve this purpose. It is submitted that the Insolvency Act should be amended to ensure that all debtors and creditors be able to obtain sequestration, regardless of whether or not they have proved advantage to creditors and that the law needs to be amended to cater for the poorest debtors and alleviate their difficulties.

Taking a critical look at voluntary surrender, the onus placed on debtor is more strenuous than compulsory surrender. South Africa’s creditor based approach to insolvency law makes it almost impossible for a debtor, who cannot fulfil this requirement, to...

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...their wealth.

In conclusion it is possible to see from the argument above that the requirement for advantage of creditors to be established, is inconsistent with s9 of Constitution. The best way to remedy is this is by enacting the Draft Insolvency Bill. If this does not occur, then other measures need to be put in place to ensure that Insolvency law is amended to ensure that equality is respected and that legislation is consistent with the Constitution, the highest law in the land.
References

Works Cited

Almeida, M.A., (n.d),’Too poor to be broke’, viewed 24 March 2014, from http://thesaur.co.za/0807.html

Kanamugire J.C., 2013,’The requirement of advantage to creditors in South African Insolvency Law- A critical appraisal’, Mediterranean Journal of Social Sciences 4(13), viewed 23 March 2014, from http://www.mcser.org/journal/index.php/mjss/article/view/1484

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