Transcript Slide 1

The organisers of the Conference
thank the following for their support
Conference Sponsor
www.buse.de
Conference Supporter
Academic Forum Sponsor
Consiglio Nazionale dei
Dottori Commercialisti e
degli Esperti Contabili
www.cndcec.it
www.edwincoe.com
The Improved Protection
of Debtors in South-Africa:
the Interaction between
the New National Credit Act
and the Insolvency Act
Professor Leonie Stander,
North-West University, South Africa
• Objective of NCA:
• Debt-relief to over-burdened consumers
• Purpose of NCA:
• Promote responsibility
• Encouraging responsible borrowing
• Avoidance of over-indebtedness
• Fulfilment of financial obligations
• Discourage reckless credit
• Aims of NCA:
– Address + prevent over-indebtedness
– Provides mechanisms
– Resolving over-indebtedness
– S 3(g) formulates core principle:
• Satisfaction by consumer
• Of all responsible financial obligations
– Clear: Does not afford discharge
• Same manner as IA
Relevant: 3 procedures
• S 85 – 88 (court + consumer)
– Provides for alleviation of over-indebtedness
through process of debt relief
• S 81 – 84
– Concerns reckless credit; prevention +
remedies thereof
• S 129 – 133 (credit provider)
– Deal with debt enforcement
• Over-indebtedness (s 79)
– Debt-review + restructuring/re-arrangement plan
– By agreement or court order
• period of the agreement extended +
• amount of each payment reduced
• or payments due postponed during
• specified period
• Or combination of both
• A 88(3): effect of debt review/re-arrangement plan
– credit provider (creditor)
– Not entitled to exercise or enforce
– Rights or security under agreement
– By means of litigation
– Or any other judicial process
• Reckless credit (s 80)
– setting aside of debtor’s rights + obligations
– Suspension of force + effect of agreement
• Debt enforcement
– S 129(1)(a): creditor obliged
– written notice
• propose that debtor refer the credit agreement to
debt counsellor
• proposing a debt repayment plan
• If creditor agrees to the plan
• debt enforcement procedure is stayed
Questions:
• While under debt review/subject to debt restructuring:
– Will creditor be able to apply for compulsory
sequestration?
– Will such application amount to debt enforcement?
– Will debtor be able to apply for voluntary surrender?
• Should court refuse since debtor does not, in doing so,
avail himself debt relief measures provided for by NCA?
– Is the sequestration procedure
• (as a collective debt settlement procedure;
• Species of execution;
• Equal treatment of creditors)
– Ousted by the debt review procedure
• (as a procedure for satisfaction of all responsible
financial obligations by an over-indebted consumer)
Point of departure:
• Insolvency Act ousted?
– S 2(7): provisions of NCA do not
– Limit, alter, amend or repeal
– Any provision of any other act
– Except
• when specifically set out in
• or necessarily implied by NCA
• No reference to IA in any section
• Refer in Schedule 2
– To s 84 and amend
– To include installment agreement
– Conclusion?
• Excluded by necessary implication?
– NCA regulates “credit agreements” only
– Unfair + unjustified as against ordinary creditor
• To prevent him from sequestrating debtor
• Because under debt review with regard to CA
• To which creditor is not party
• Application for voluntary surrender
– Court has discretion to grant order
– If satisfied that:
• Insolvent
• Formalities
• Free residue
• Advantage creditors
• Advantage of creditors decisive role
– Court will consider alternatives
– Such as debt arrangement/restructuring
– What is the best option/solution?
• Ex parte Ford 2009 (3) SA 376 (WCC)
– Major portion of liabilities: credit agreements
– Huge debts, small income
– Indicates over-indebtedness, reckless credit
– Court referred to its powers in s 85
– Information given insufficient
– Decided in effect:
• NCA more appropriate mechanism in circumstances
• Thus: Necessary implication • before making application
– Debtors must take into account
– Options outside sequestration
– Where debt largely consists of CA’s
– Remedies provided by NCA
• Compulsory sequestration
– Court has discretion to grant order
– If satisfied that:
• Applicant is creditor
• Debtor insolvent/act of insolvency
• Formalities
• Reason to believe: Advantage creditors
• Again advantage of creditors decisive
– Other alternatives also relevant
– Same factors as in Ford-decision
• Other scenario:
– Investec Bank v Mutemeri 2010 (1) SA 265 (GSJ)
• Debtor applied for debt review
• Would be heard one year later
– 2 Questions:
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• Is s 88(3) applicable?
– (when notice of debtor's application for debt review
received
– creditor may not exercise/enforce any right under CA)
• No, creditor may rely on claim ito CA to qualify as
creditor to apply for sequestration
• It does not exercise/enforce its rights in doing so
• Is application for seq “order to enforce credit
agreement” ito s 130?
– Then notice ito s 129 essential
• Court: not ordinary debt enforcement
– “The purpose or effect of the sequestration is merely to
bring about a convergence of claims against an insolvent
estate to ensure that it is properly wound up in an orderly
fashion and that the creditors are treated equally.”
• S 29 notice not necessary
• Crux: estate of debtor subject to debt review
may be sequestrated
• Naidoo v ABSA Bank Ltd 2010 (4) SA 597 (SCA)
– Debtor sequestrated
– Appealed: creditor did not give notice ito s 129
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– Although not debt enforcement
– S 130(3): “any proceedings …in respect of
a credit agreement”
– Decision:
• Seq of debtor's estate not an order for
enforcement of sequestrating creditor's
claim, but species of execution
• S 130(3) must be read in context
• Observations
The organisers of the Conference
thank the following for their support
Conference Sponsor
www.buse.de
Conference Supporter
Academic Forum Sponsor
Consiglio Nazionale dei
Dottori Commercialisti e
degli Esperti Contabili
www.cndcec.it
www.edwincoe.com
The organisers of the Conference
thank the following for their support
Conference Sponsor
www.buse.de
Conference Supporter
Academic Forum Sponsor
Consiglio Nazionale dei
Dottori Commercialisti e
degli Esperti Contabili
www.cndcec.it
www.edwincoe.com
The organisers of the Conference
thank the following for their support
Conference Sponsor
www.buse.de
Conference Supporter
Academic Forum Sponsor
Consiglio Nazionale dei
Dottori Commercialisti e
degli Esperti Contabili
www.cndcec.it
www.edwincoe.com
The organisers of the Conference
thank the following for their support
Conference Sponsor
www.buse.de
Conference Supporter
Academic Forum Sponsor
Consiglio Nazionale dei
Dottori Commercialisti e
degli Esperti Contabili
www.cndcec.it
www.edwincoe.com