It might happen that you have heard people talking about being insolvent and that their assets are sequestrated. This article will take you through the meaning of Insolvency for a person (NOT a company – that is Liquidation and will be covered in a later blog).  We will also discuss who a debtor is for the purposes of insolvency, the purpose of a sequestration order and who may be sequestrated.

Meaning of: “Insolvency”

A person is insolvent when his liabilities exceed his/her assets. Inability to pay debt is, at most, merely evidence of insolvency.

A person who has insufficient assets to discharge his/her liabilities, although satisfying the test of insolvency, is not treated as insolvent for legal purposes unless his/her estate has been sequestrated by an order of the court.

A sequestration order is a formal declaration by the High Court that a he/she is insolvent.  The order is granted either when he/she voluntarily surrenders their estate or where one or more of his/her creditors apply for compulsory sequestration.  The person in this circumstances is referred to as a debtor (someone who owes money to creditor(s)).

Who can be regarded as a “debtor”?

The term “debtor” is technically wider than just a single person.  It embraces the following:

• A natural person
• A partnership
• A deceased person
• A person incapable of managing his own affairs
• An entity or association of persons that is not a juristic person, such as a trust
• Parties married in Community of Property

The purpose of a sequestration order

The order of sequestration is made by the High Court to secure the orderly and equitable distribution of a debtor’s assets where they are insufficient to meet the claims of all his creditors. A sequestration order is issued by court to execute property belonging to a debtor in order to for the creditors to be paid which in some cases one or a few creditors are being paid, and the rest receiving little or nothing at all. However, the law takes its cause to ascertain that whatever assets the debtor has are liquidated and distributed among all his creditors in accordance with a predetermined fair order of preference.

Once an order of sequestration is granted, a coming together of creditors is established, and the interests of the creditors as a group enjoy preference over the interests of individual creditors.

A creditor’s right recover his claim in full by judicial proceedings is replaced with the right, on proving a claim against the insolvent estate, to share with all other proved creditors in the proceeds of the estate assets.

Apart from what is permitted by the Act, nothing may be done which would diminish the assets of the estate or prejudice the rights of creditors.

The law of insolvency exist primarily for the benefit of the creditors, thus a court will not sequestrate a debtor’s estate unless it’s known that the sequestration will be to the benefit of the creditors. Thus a sequestration order would not be granted if there is only one small creditor or if the debtor’s assets are not sufficient to cover the costs of sequestration, and so the creditors of the debtor would then have to seek individual relief against the debtor by taking judgment against him for nonpayment of debts.  The concept of sequestration being to the benefit of creditors means that each creditor must benefit – receive some dividend from the sequestration order being made.

What may be sequestrated?

Estates that fall with the meaning of the word “estate” with regard to insolvency:

• An estate that includes assets and liabilities
• An estate that consists of liabilities only
• The joint estate of spouses married in community of property
• The separate estates of spouses married out of community of property
• The new estate of a debtor whose estate has been sequestrated.

Written by Portia Dlamini

These terms are often mentioned in laws, contracts and news articles.  What do they actual mean?

Status refers to your rights and responsibilities in civil and criminal law and whether you can sue or be sued.

This is further limited by your domicile (where you live and consider to be your home country), your age and your mental capacity.

Age and capacity go hand in hand, as described below :

1. 0-7 Years old- Children between these ages have no capacity to act and need a parent or guardian to act on their behalf;
2. 7-18 Years old- These ages have limited capacity to act. At this stage a minor (any person under the age of 18 years) can enter into contracts but need their parent or guardian to consent before it is legally binding; and
3. 18 years and above- You are now considered a major and have unlimited capacity to act, unless you are mentally incapacitated.  In this case, the court would appoint a Curator to administer your affairs on your behalf in your best interests.

Here are some random and interesting other facts about the law and age:

1. 0-10 Years – Children between these ages have no criminal liability;
2. 10 Years old – 18 Years old- these minors need to consent to an adoption to be legal;
3. 14 years and older- This person can be a witness to a will;
4. 12 Years and above- a minor can make medical decisions for themselves without their parents/guardians consent if they understand the risks involved ;
5. 12-15 Years old- A minor of this age can get married with consent of their parent/guardian and the Minister of Home Affairs, when they are married they still obtain the status of majority even after divorce; and
6. 16 Years and above- A minor can now execute a will for themselves without assistance or consent of a parent or guardian.

The law therefore indicates that to enter into any legal contract or litigation in general one must know of their legal status in order to peruse same legally.

For any questions on your legal status contact our offices today on 031 003 0630 or email us at Charmaine@schwenninc.co.za.

#newblog #schwenninc #legalcapacityandstatus #attorneysatlaw #litigation #contracts

This is a question that each director of either a small, medium or large firm must take into account when considering competition in the market. Negligence has left a lot of firms in a position that leads to them breaking down, but for a firm to successfully compete in a market one must take the following into account.

 ESTABLISHING DOMINANCE

A definition of a dominant firm appears in section 7 of the Competition Act. The inquiry into whether an entity is a dominant firm includes an identification of the relevant market in which the firm is involved, it’s market share within that market and whether it possesses the relevant market under section 7 depends upon the market share enjoyed by the firm alleged to be dominant.

WHEN IS A FIRM DOMINANT?

Section 7 of the Competition Act states that a firm is dominant in a market if:

• It has at least 45% of that market
• It has at least 35%but less than 45% of that market
• If it has lee than 35% of that market but it has market power

The statutory test for dominance requires an assessment of market share and market power. A firm with a market share of 45% or more cannot escape being conspired dominant per se, however, for those firms with a market share of less than 45%, market share is only one aspect that needs to be considered.

If the firm has a market share of less than 45% but equal to or more than 35%, the onus is on the firm to show that it does not have market power.

If a firm cannot produce evidence to show that it does not enjoy market power, then the firm is dominant.

Likewise, a firm with less than 35% of a market share may be dominant if it has market power. However, in this case, the onus is the complainant in the case or where relevant, the Competition Commission, to show that the firm has market power.

TEST FOR DOMINANCE

A firm can only be determined once the market in which the firm competes is correctly defined. Accordingly, the definition of the relevant market is an important initial step in establishing whether a firm qualifies as dominant. It is quite possible for a big conglomerate firm that participates in various diverse industries not to be dominant in any relevant market.

So, the main question to ask is when does a firm have market power? The Competition Act defines market power as the ability to:

• Control prices
• Exclude competition
• Behave to an appreciable extent independently of competitors, customers, and suppliers.

Market power provides the firm with the ability to set prices above the competitive price level, and in so doing earn a greater profit than it would have under competitive conditions in the market.  

WHAT DOES THE DOMINANCE PROVISION PROHIBIT?

In terms of section 8 of the Act, it is prohibited for a firm to:

1. Charge an excessive price to the detriment of consumers;

2. Refuse to give access to competitors access to an essential facility when it is economically feasible to do so;

3.Engage in an exclusionary act, other than that listed below if the anti-competitive effect outweighs its technological efficiency or whether pro-competitive gain;

4. Engage in any of the following exclusionary acts, unless the firm concerned can show technological efficiency or other pro-competitive gains which outweigh the anticompetitive effect of its act;

• Requiring or inducing a supplier or customer not to deal with a competitor. This transpired in the case of Comair Ltd v SAA 2008 where SAA induced airline agents to not deal with Nationwide Airlines and Comair who were complainants in selling the tickets but only sell SAA tickets to customers in return for an incentive promised by SAA.

• Refusing to supply scarce goods to a competitor when supplying those would be economically feasible.

• Selling goods or services on conditions that the buyer purchases separate goods or services unrelated to the object of a contract or forcing a buyer to accept a condition unrelated to the object of a contract or forcing a buyer to accept a condition unrelated to the object of the contact.

• Selling good and services below their marginal or average variable cost.

• Buying up a scarce supply of intermediate goods or resources required by a competitor.

Before one engages in the market it is advisable to look out for such conduct, apply the Act where applicable.

We can help with this!  We have extensive experience with the Competition Commission, having appeared before the commission on behalf of clients and dealt with Competition matters, up to and including, challenging fines, opposing applications brought by the Competition Commission, representing clients before the Competition Tribunal, among others.

Contact: Charmaine Schwenn

                Charmaine@schwenninc.co.za

031 -0030360

WRITTEN BY: PORTIA SAMKELISIWE DLAMINI

13/05/2019