8._Impeachable_Dispositions - 1 8 IMPEACHABLE DISPOSITIONS To impeach something means to call into question its validity The insolvency Act has a number

8._Impeachable_Dispositions - 1 8 IMPEACHABLE DISPOSITIONS...

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8. IMPEACHABLE DISPOSITIONS To ‘impeach’ something means to call into question its validity. The insolvency Act has a number of sections designed to safeguard the interests of the creditors and some of the sections are intended to protect the creditors where the insolvent has entered into transactions PRIOR to insolvency which have the effect (upon insolvency and sequestration) of being prejudicial to the general body of creditors. Such transactions are called ‘dispositions’ because it involves a disposing of an estate asset (including money). A trustee or a creditor may impeach a disposition (ie bring its validity into question) by making an application to the court to have it set aside. Should a court be of the opinion that the disposition should be set aside, the disposition is consequently retrospectively invalid and the asset (or its value) is retrieved (from the party to whom the insolvent disposed the asset to) and it is available to be distributed amongst the creditors. Four main types of impeachable dispositions exist: (1) dispositions without value, (2) voidable preferences, (3) undue preferences and (4) collusive dealings. These are not the only types of dispositions that exist, there are other statutory and common law dispositions that may also be set aside (See Hocklys 141-143; 136-137 and Mars 276-280; 280; 280-283). Section 2 of the Act defines ‘disposition’ as any transfer or abandonment of rights to property (movable or immovable). Examples of a disposition specifically mentioned in the Act are if the insolvent sells property; leases property; mortgages / pledges property; delivers property; makes a payment (the money i\3 .0 tself being the movable property); releases a person from paying him a debt owed; makes a donation of property (cash or physical assets). This is definitely NOT a closed list. A disposition will be any contract which has the effect of a transfer of abandonment of rights to property, thus the definition is a very wide one. 8.1 Dispositions without value Dispositions without value are governed by s26 of the Insolvency Act: - In terms of s26(1) every disposition of property not made for value may be set aside by the court if the disposition was made by the debtor: s26(1)(a) more than two years before the sequestration of his estate and it is proved that immediately after the disposition was made the liabilities of the insolvent exceeded his assets; ( here the onus of proof is on the trustee) s26(1)(b) within two years of the sequestration of his estate and the person claiming under or benefiting by the disposition is unable to prove that immediately after the disposition was made the assets of the insolvent exceeded his liabilities ( here the onus of proof is on the recipient of the disposition ) .
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