Description
A) Briefly explain the purpose of a sequestration order.
A sequestration order in South African insolvency law serves several core purposes. Its primary function is to ensure the fair, equitable, and orderly distribution of an insolvent debtor’s estate among all creditors, rather than allowing individual creditors to act independently and possibly prejudicially. Once a sequestration order is granted, it brings about a concursus creditorum, freezing the debtor’s estate and consolidating all claims so that creditors must pursue their rights collectively through the appointed trustee, under court supervision. This centralisation of enforcement not only protects the integrity of the estate but also increases the likelihood that preferential claims are honoured and that pro-rata distributions are made fairly.[1]
[1] Smith, A. & Sharrock, R. Hockly’s Law of Insolvency, Winding-Up and Business Rescue, 10th ed. Juta, 2022, pp. 1–3.
