MRL3701 STUDY UNIT 19 –COMPOSITION | Questions And Answers Latest {2024-
2025} A+ Graded | 100% Verified
COMPROMISE - Debtor who is in financial difficulty or whose estate has been provisionally sequestrated
can avert insolvency by entering into a compromise with his creditors
COMPROMISE 2 - Debtor whose estate has been sequestrated finally may obviate the usual process of
liquidation of the estate assets and shorten the period of his insolvency by making a compromise with
his creditors i.t.o. s119 of the Act.
COMMON LAW COMPROMISE - After provisional order of sequestration has been granted, insolvent
may enter into written agreement with creditors and provisional trustee to pay certain dividends on
creditors' claims, on condition that he be release from his debts and nay provisional order of
sequestration is discharged.
ALL concurrent creditors must approve.
- Embodied in single document with provision for signature by each creditor
- offer is made on condition that all creditors sign
- no liability attaches to any single creditor until all have signed and an signatory may withdraw before
this
If offer accepted and provisional order discharged the rights and duties of the various parties, including
a surety, must be decided in accordance with the terms of the deed and the provisions of the common
law.
Should compromise involve sale of assets by the provisional trustee - permission from must must be
obtained for the sale.
OFFER OF COMPOSITION IN TERMS OF S119 - Anytime after fist meeting with creditors, insolvent may
submit a written offer of composition.
, If trustee is of opinion that the creditors will probably accept the offer, must post in a registered letter
or deliver to every proved creditor a copy of the offer with his report on it.
If trustee considers that there is no likelihood that creditors will accept the offer he must inform the
insolvent that the offers is unacceptable and that he does not propose to send a copy of it to creditors.
Insolvent may then appeal to the Master, who after considering a report from trustee, may direct the
trustee to post and deliver a copy of the offer ot every proved creditor.
Once letters sent or delivered the trustee must convene and give creditors notice of a meeting to
consider the offer and other matter mentioned in the notice s119(5)
Date of meeting must be not earlier that 14 days, and not later than 28 days, after posting or delivery of
the notice.
Meeting is general meeting i.t.o. s41 and must be convened in the manner prescribed by s40, by
publication of a notice in the Gazette and in one or more newspapers.
Notice must contain specific reference to the offer of composition as a matter to be dealt with at the
meeting.
TERMS OF COMPOSITION - Offer of composition may contain any terms the insolvent sees fit to
incorporate in it, including terms to the effect that he should immediately be reinvested with his assets
and that he should be release from further liability in respect of his debts.
REQUIREMENTS AND RESTRICTIONS FOR TERMS OF COMPOSITION - 1. Where offer of composition
provides for the giving of security, the nature of the security is to consist of a surety bond or guarantee,
every surety should be named
2. Offer of composition may not be accepted if it contains a condition entitling one creditor to obtain,as
against another, a benefit to which the former would not have been entitled upon the distribution of
the estate in the normal way. - Includes creditor who has not proved a claim.
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