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Thread: Directorship/Member/Trustee after sequestration

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    Directorship/Member/Trustee after sequestration

    The other day I was asked by a client whether he would be disqualified form being a Director of a PTY / Member of a cc or Trustee of a Trust if he is sekwestrated. I could not give him a straight reply.
    Does anyone have an opinion on this and if this disqualifies hime what other options does he have to do business?

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    Site Caretaker Dave A's Avatar
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    A.F.A.I.K you can't be a director of a company or a public officer if you are an unrehabilitated insolvent in terms of the companies act. I'm not sure about the ordinary member of a cc, though.

    The trustee of a trust one is interesting. The question arises - even if it's legal, is it advisable?

    Same question might be relevant for the ordinary member of a cc...
    The trouble with opportunity is it normally comes dressed up as work.

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    Thanks Dave
    What options are then open for this person to do business

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    Site Caretaker Dave A's Avatar
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    Married men in this situation often circumvent the problem through their wife (provided she is amenable). Ultimately, if you can't be fronted by someone you can trust, you're in a bit of a mess.

    The only other option would be sole proprietor (or partnership if you can find a willing partner). The weakness is that if you make money, you get all the old creditors sniffing after you again. Best to come to an arrangement with the unpaid creditors if you can.

    At the end of the day it's a serious handicap having an unrehabilitated insolvent in an ownership or top management position, especially if the enterprise needs financing or credit facilities.

    Tell your client to get rehabilitated as soon as possible. After a couple of years being a rehabilitated insolvent can even become a battle scar of honour.
    Last edited by Dave A; 09-Jun-10 at 04:29 PM.
    The trouble with opportunity is it normally comes dressed up as work.

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    Interesting info about a sole proprietorship Dave. What would the curator's position be on this, or a partnership?

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    Site Caretaker Dave A's Avatar
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    I would hope the curator would welcome viable means to get the insolvent rehabilitated as first prize
    The trouble with opportunity is it normally comes dressed up as work.

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    Are you saying that the curator could expropriate funds from the insolvent's business activities (partnership or sole proprietorship) or generated by the insolvent for the benefit of creditors (or the curator's fees) prior to rehabilitation? Another way of asking; Is wealth generated subsequent to the sequestration date exclusively the asset of the insolvent (by whatsoever means - partnership or sole proprietorship), beyond the reach of the curators fees and expense and creditors?

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    Site Caretaker Dave A's Avatar
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    Quote Originally Posted by hf0157 View Post
    Another way of asking; Is wealth generated subsequent to the sequestration date exclusively the asset of the insolvent (by whatsoever means - partnership or sole proprietorship), beyond the reach of the curators fees and expense and creditors?
    I sense a snooker coming, so may I cover this from my original POV (which certainly has little to do with the legal subtleties in this instance).

    My departure point is what is the insolvent to do - sit around and do nothing as the clock ticks? At that stage surviving the next 5 years is very much driven by the law of the jungle. They are faced with obtaining formal employment if possible, operating by proxy, or "informal sector" style self-employment.

    The second aspect considered in the "sole proprietor or partnership" angle is that there's no formal process to the formation of a separate juristic person as an obstacle. In fact, a separate juristic person is not formed.

    Last, I suggest the curator and creditors are only going to get interested if there's clear signs of money to be had.

    Your line does raise the question, though -

    If the insolvent lands a good job that pays well, could the curator obtain a garnishee order against his/her salary?
    The trouble with opportunity is it normally comes dressed up as work.

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    Platinum Member sterne.law@gmail.com's Avatar
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    A few quick points -
    trustee can not have been an insolvent.
    An insolvent can be a shareholder of a cc but may not be involved in the management thereof.
    When the insolvency process starts, the "estate" vests in the trustee(of the onsolvent estate - not to be confused with trustee of a deceased estate). It is both possible for the insolvent to start a new estate(that is new assets etc) that are not a part of the insolvent estate - but by the same token once insolvency starts, new assets and income might be a part of the insolvent estate.
    To Dave's question - it is possible that a salary or income might be used to settle debts for theinsolvent estate
    Anthony Sterne

    www.acumenholdings.co.za
    DISCLAIMER The above is merely a comment in discussion form and an open public arena. It does not constitute a legal opinion or professional advice in any manner or form.

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    Dave A (17-Jun-11)

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    Platinum Member sterne.law@gmail.com's Avatar
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    Also, reading original post - it is possible, if you are the only member or Director, to be excused, so to speak, and allwoed to oeprate any form of busienss entity. It is on application to court - so not a given.
    Anthony Sterne

    www.acumenholdings.co.za
    DISCLAIMER The above is merely a comment in discussion form and an open public arena. It does not constitute a legal opinion or professional advice in any manner or form.

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